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Title: East-West Trade Trends - Mutual Defense Assistance Control Act of 1951 (the Battle - Act); Fourth Report to Congress, Second Half of 1953
Author: Stassen, Harold E.
Language: English
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  East-West Trade Trends

  MUTUAL DEFENSE ASSISTANCE CONTROL ACT OF 1951

  (the Battle Act)

  * * *

  FOURTH REPORT TO CONGRESS

  Second Half of 1953



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 Free World Is Strong
     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.


=Emphasis on Heavy Industry=

The basic cause of these continual disappointments now is widely
understood: The Communist elite, while preaching continually about
the "uneven development of capitalism" and the "ever-increasing
decomposition of the world economic system of capitalism," created a
remarkably lopsided economy of their own, in comparison with which the
free economies of the West look very well-balanced indeed.

Beginning in the 1920's the Bolsheviks deliberately concentrated on
building a base of heavy industry. In their 5-year plans, pig iron,
steel, coal, oil, electric power, factories, heavy machinery, armaments
have always been given the right of way over the needs of the people
for meat, fish, vegetables, vegetable oils, milk, butter, chairs,
tables, beds, bicycles, watches and clocks, radio sets, decent homes,
boots and shoes, fabrics of cotton, wool, and silk--and so on through
the myriads of consumer items that are commonplace in most Western
countries.

Impressive advances have been made in heavy industry. But this was done
at a staggering cost to the inhabitants. It was accomplished through a
vast use of forced labor and police discipline, and through the neglect
of the manufacturing of consumer articles, the growing of foodstuffs
and textile fibers, and the building of homes and retail stores.

The Kremlin made strenuous efforts to maintain the flow of farm
products to the cities, even while drawing labor away from the farms.
But heavy metalworking industry was always considered more important
than food and clothing. And more important, too, was the long, bitter
and as yet unsuccessful attempt to cram collectivism down the throat
of the Russian farmer. Stalin considered this struggle ideologically
essential. Moreover, it was the means of forcing the peasants to supply
food and raw materials to the growing industrial complex without
receiving consumer goods in return. All in all, the failure of Soviet
farm policy was one of the most resounding failures in the brief
history of the U.S.S.R.--and it still is. Bread and potatoes are the
principal diet of the masses, and even the grain and potato crops are
unsatisfactory.

During the years of Hitler's devastating invasion, the Kremlin had
to dedicate the energies of Soviet Russia to a fight for survival.
But when the Grand Alliance crushed Hitler, and the western nations,
hoping for a peaceful world under the United Nations, practically
dismantled their military establishments and fell back into their
normal roles as consumption economies, the Kremlin did not alter the
lopsided war economy of the Soviet setup. The Stalin regime inaugurated
a new phase of hostility toward the West. The grim drive to build
up an industrial-military foundation continued. Consumer goods were
still given a low priority in the scheme of things. And all this was
discouraging not only to prospects of world peace but also to the
prospects of happiness and dignity for the weary and heroic Soviet
peoples.


=How Forced Industrialization Affects Trade=

Moscow laid the same pattern upon the European satellite countries
and cut them to fit the pattern. Heavy industrialization was imposed
on them regardless of their desires and the needs of the people. This
forced industrialization absorbed large amounts of commodities that
were formerly available for export to the free world. At the same time
the collectivization of agriculture was imposed on the satellites, and
this aggravated the difficulties of keeping pace in farm output.

While these policies were reducing the total amounts of goods the
satellites had available for export to the West, the U.S.S.R. was
siphoning off great trainloads of what remained. The ability of these
countries to trade with the West was further reduced as they were
pushed into granting priorities to one another on the exchange of items
they could have more profitably sold to the free world.

Moscow also forced upon the satellites the characteristic Soviet
trading goal of reducing and eventually eliminating all dependence on
the free world. Lenin himself had emphasized that the first goal of the
Soviet Union in its economic relations with the outside world was to
gain "economic independence from the capitalist countries." A prominent
Soviet economist, Mishustin, in a book published in 1941, spelled out
this principle in greater detail:

     The main goal of the Soviet import (policy) is to utilize foreign
     products, and above all, foreign machinery ... for the technical
     and economic independence of the U.S.S.R.... The import (policy)
     of the U.S.S.R. is so organized that it aids the speediest
     liberation from the need to import.

In 1946 the leading Soviet economist, Vosnosensky, restated the
objective in the Government periodical, _Planned Economy_:

     The U.S.S.R. will continue in the future to maintain economic
     ties with foreign countries in accordance with the tested line
     of the Soviet government directed towards the attainment of the
     technical-economic independence of the Soviet Union.

The Kremlin's new Eastern European empire included vast natural
resources and sizeable labor reserves. Nevertheless it was--and still
is--a long way from being self-sufficient, in the sense of being able
to match the production levels of the free world, or even in the sense
of fulfilling its own ambitious production plans, without trade with
the West. Imposing an ultimate goal of self-sufficiency thus could not
eliminate the Soviet bloc's dependence on the free world. Communist
trade planners still found it advantageous to import from the free
world many things the bloc countries needed. The new goal did, however,
affect the composition of the satellites' trade. The planners placed
much greater emphasis on the importation of industrial raw materials
and equipment that would, in the long run, reduce the need to import.

In the U.S.S.R. itself, the Government had always been disinclined to
offer exports in order to import consumer goods, like meat, butter,
textiles, and appliances. Now the same policy was clamped on the
satellites. So the bulk of Soviet-bloc imports from the West consisted
of goods that did not enter the homes of the people.

[Illustration: VOLUME OF TRADE OF OEEC COUNTRIES WITH EUROPEAN SOVIET
BLOC]

The result of all this was a big decline in trade between Western
and Eastern Europe, as compared with prewar years. Before the war,
countries which now make up the Soviet bloc in Europe carried on less
than 10 percent of their foreign trade with one another; now this has
risen to more than 75 percent.


=How the Kremlin Controls Trade=

All foreign trade of the countries of the enlarged Soviet empire was
placed under absolute state control. For both the U.S.S.R. and the
satellites, international trade is now not only a 100-percent monopoly
of the state, but also an integral part of the planned economy,
officially proclaimed as such. Each country, as a part of its general
economic plan, estimates its import requirements and then develops a
program of exports to pay for the imports. These country plans are
coordinated by Moscow. Part of the machinery of all this economic
planning and trade coordination is an organization, with headquarters
in Moscow, called the Council of Mutual Economic Assistance.

This totalitarian trading system insures that foreign trade serves the
purposes of the state.

Top priority in trade planning is given to the requirements of the
U.S.S.R. Bloc countries are required to give one another preferential
treatment in trade. With this system the export of any items to the
West is easily restricted as it suits government purposes--whether or
not the items could be considered as "strategic."

A vast amount of commercial information is obtained by bloc governments
through their dealings with free-world traders and through their
intelligence services. This provides Moscow with a comprehensive
picture of the bargaining strengths and weaknesses of free-world
traders.

Moreover the Soviet-bloc governments, as large buyers and sellers
controlling the production and trade of a whole country, indeed a group
of countries, enjoy certain bargaining advantages in dealing with the
many smaller competing buyers and sellers in the marketplaces of the
free world. Since losses on individual transactions can be absorbed in
longer-term government gains on other deals, the unit profit need not
be the factor that determines the advantage of a deal, as it generally
does for the free-world trader. Soviet-bloc governments can--and not
infrequently do--set their prices at levels which discriminate among
the various buyers and sellers with whom they deal. They exercise
monopoly control not only in selling their own goods abroad but also
in disposing of imported goods at home. The Soviet-bloc governments
get bargaining advantages from such practices, made possible by their
totalitarian trading system--practices which the West would not wish to
imitate but which it might as well squarely face.

Foreign trade is a political as well as an economic weapon in the hands
of the Soviet Communist state. By way of illustration, in 1948 it was
possible for the Kremlin first to reduce and then to cut off all trade
between Eastern Europe and Yugoslavia as a part of the attempt to
bring Marshal Tito to his knees. The attempt failed, but the Yugoslavs
suffered serious economic difficulties before they could readjust.
Even earlier, the world had seen how the Kremlin refused to allow the
Eastern European countries to benefit from the flow of Western goods
that could have been theirs under the Marshall plan--another evidence
of how the state's objectives took precedence over the people's needs.

The Kremlin in its propaganda made much of Western trade restrictions.
But the West's limited controls over the shipment of strategic goods
did not come into existence until long after the Kremlin had begun
using trade as a cold-war weapon. Even then these Western controls,
far from being aggressive actions against peaceful trade or against
the welfare of populations, were common-sense measures of economic
_defense_, designed only to foster Western security by withholding from
aggression-minded governments the important war-building materials that
would make aggression easier.

On the other hand, the Kremlin's long-term objectives in its economic
relations with the free world are far more than defensive. They have
a dual character: strengthening the bloc and weakening the free-world
powers. These objectives can be summarized as follows:

       1. To feed the economy, especially the industrial-military base,
     with imports that help the bloc become more powerful and less
     dependent on the free world.
       2. To drive wedges among free-world nations at every opportunity.
       3. To increase the reliance of free-world nations on the bloc for
     markets or supplies, and thus make the free world more vulnerable
     to bloc pressures.


=West Has Never Barred Peaceful Exports=

The Kremlin, while coldly managing the East-West trade of its domain
in the manner described, always had its propagandists and fellow
travelers out beating the drums and making a continual outcry against
the security trade controls of the West. The main line of the
propaganda was that trade was equivalent to peace and prosperity,
and that the Soviet bloc always stood ready for unlimited trade, but
that the Western "economic blockade" barred the way. In each country
the businessmen were constantly handed the false but inflammatory
story that they were being shamefully discriminated against by their
government and that the businessmen of neighboring countries were less
subject to restrictions. Western Europe as a whole was treated to an
alluring picture of a vast prospect of East-West trade, beyond all
factual probability in view of Soviet policies.

This propaganda cannot be separated from the Soviet trading objectives.
It is merely one of the instruments used in trying to achieve those
objectives. It was used lavishly at a Moscow Economic Conference in
April 1952, but although some Western businessmen who attended that
meeting were impressed, the chief result was not an expansion of
trade or elimination of Soviet discriminatory practices, but only the
formation of new propaganda councils. And one of the significant facts
of the present situation is that, although some new economic factors
have arisen, the main propaganda line stays the same. At the Berlin
four-power conference in late January 1954, Molotov used it again.

The truth is that Western controls, which did not become effective
until the 1950's, have never been an "economic blockade." The controls
apply to a small percentage of the types of goods which made up
East-West trade in the prewar years or in 1948. They leave room for
the expansion of trade in many items. There are even many kinds of
industrial raw materials and products which have never been embargoed
by the Western Governments. Western security controls were not
primarily responsible for the low levels of East-West trade.

The main causes were Soviet policies, which wrenched the customary
trade of the satellites away from Western Europe, tying it to the
U.S.S.R., and which forced industrialization upon the whole European
bloc in a manner which reduced its ability to trade with the West. In
addition to these basic causes, the bloc countries were unsatisfactory
trading partners in many ways. The prices were often higher than the
world market; the deliveries were uncertain and sometimes deliberately
withheld; the quality of their goods was often inferior; and some of
the countries had a regrettable--and perhaps intentional--tendency to
go into debt to the West.


=Stalin's Last Gospel=

Stalin himself, in the year before he died, made some illuminating
statements about the reorientation of the trade of Eastern Europe. He
wrote an article, The Economic Problems of Socialism in the U.S.S.R.,
which was published in October 1952, though it had been written earlier
in the year. In this article Stalin said that the most important
economic consequence of World War II was "the disintegration of the
single, all-embracing world market." Actually there was scarcely a
single world market before the war, but Stalin obviously was talking
about the change in the trade of those countries that fell into the
Soviet orbit during the war or shortly thereafter. He said that "now
we have parallel world markets," confronting one another. He then made
the customary charge that the Western countries, through an "economic
blockade," had tried to "strangle" the Eastern European countries. He
said the West had thereby unintentionally contributed to the formation
of the new parallel world market. On this occasion, however, Stalin
went on to say that "the fundamental thing, of course," is not the
Western economic blockade, but the fact that since the war the Eastern
European countries "have joined together economically and established
economic cooperation and mutual assistance."

He made it perfectly plain that, in Kremlin thinking, the breakdown of
the "one world market" and the establishment of two rival markets was a
tremendous boon to the Communist cause, because it shrank the markets
available to the "capitalist countries" and intensified a struggle
which the Communists always see as going on among those countries. And
this, Stalin said, rendered more acute what he called the "general
crisis of capitalism."

To picture the free world as in or near a general economic crisis is
of course familiar Communist mythology. But Stalin's discussion did
reveal clearly the Communist indifference to the mutually fruitful
and expanding international trade that the West desires. It was an
admission of Communist responsibility for--or at least satisfaction
with--a divided trade world.

So much for Stalin's last economic gospel. Stalin's death was announced
on March 5, 1953. Now let us examine what has been going on in his
absence.



_CHAPTER II_

=The New Regime and the Consumer=


After Stalin, the Soviet leadership was taken up by a group of top
party officials. Georgi M. Malenkov was the Premier and the most
influential, but apparently several other men held important shares
of the responsibility and the power. This elite group included, with
varying degrees of personal influence, Beria (temporarily), Molotov,
Khrushchev, Voroshilov, Bulganin, Kaganovich, and Mikoyan. None of this
new group was new to Soviet leadership. All had been close lieutenants
of Stalin. All are known to have had important roles in previous policy
formulation, and in directing key operations.

The system that this group took over in the U. S. S. R. was their
own as well as Stalin's creation. Under this system, the economy
is organized along authoritarian lines and characterized by state
ownership of the means of production and state planning of practically
all economic activity. It is the Central Committee of the Communist
party which lays down the economic and social policies which the state
production plans are desired to implement. The new regime modified this
system in no essential respect.

In addition to inheriting the _system_, Malenkov and his associates
inherited economic policies and economic conditions which they
themselves had helped to create.

In the U.S.S.R., as we have seen, Soviet economic policy had long
been to force industrialization by every means. And this objective
required such a concentration of capital investment--both civilian
and military--as to deprive the growing population of advances in
living standards commensurate with the overall expansion of the Soviet
economy. That is another way of saying they took it out of the people's
hides.

Each of the European satellites, too, had undertaken, under Soviet
direction, to develop an economic structure similar to that of the
Soviet Union. By 1953 all foreign trade, nearly all industry, and
a very substantial portion of domestic trade had been nationalized
in those countries. Where collectivization of agriculture was
not completed, the Government controlled agriculture by means
of centralized planning and a system of compulsory deliveries.
Each satellite government had drawn up a long-term comprehensive
economic plan which, like that of the U.S.S.R., emphasized rapid
industrialization.

These developments brought the Communist leaders many serious
problems--and the people many deprivations. Before the war, as
independent states, most of these satellite countries had devoted a
much higher percentage of resources to the consumer sectors of their
economies than was customary for the U.S.S.R. When the Communists took
control, belts were tightened. The standards of living of the satellite
peoples began to decline toward the low levels long prevalent in the
U.S.S.R. But denying the satellite peoples the fruits of their labors,
in imitation of Moscow patterns, still did not bring the overambitious
war-economy plans to success. Agriculture and industry both had
difficulty in keeping pace. The world has heard how the transformation
of satellite agriculture into the Soviet pattern was impeded by the
opposition of the rural populations to collectivization and by the
difficulties of mechanizing farm output; how shortages of raw materials
slowed the textile program in Czechoslovakia and the electric power
industry in Hungary; how the mining and metallurgical industries lagged
in some areas; how the rights of labor were obliterated in the attempt
to shift manpower into heavy industry; how purges furnished scapegoats
for Communist failures.


=Letting Off Pressure=

In the summer of 1953 came the electrifying news of rioting in East
Germany.

Also in the summer of 1953, new economic targets were announced in the
U.S.S.R. and some of the satellites. These new targets--which will be
discussed further in a moment--were said to be a means of improving the
lot of consumers.

Some observers in the West assumed that economic difficulties in the
bloc were erupting with such force that they threatened to topple the
Malenkov regime. This interpretation is understandable--any democratic
nation would have long since replaced a regime that in peacetime so
subjugated the needs of the people--but such an interpretation of the
Soviet scene must be viewed with great skepticism. At this writing
there was some evidence that the problems faced by the Kremlin may in
some respects have become more difficult since Stalin's death, but one
could not infer that the chronic economic difficulties of the Soviet
bloc were especially different in nature from previous post-war years,
nor that the Communist governments with their inhuman police control
were about to collapse.

What the Communist rulers were facing was their perennial problem of
developing lopsided economies without letting the lopsidedness become
so repressive on the people as to upset the plans and timetables.
Even in police states there are physical and psychological limits
beyond which human beings cannot be driven without lowering their
incentives, their energy, their morale to the degree that production
is severely hampered. The Soviet leaders have always recognized this.
At three different periods in the thirty-odd years of their control of
the U.S.S.R. they have shown themselves adept at opening the valves
enough to relieve accumulating pressures and then shutting them
again--always without swerving very far in the basic drive to build the
industrial-military machine.

Many observers believe that even prior to Stalin's death the time
was ripe for a slight relaxation in the postwar consumption squeeze.
The Kremlin faced multiple problems in consolidating its new empire.
External foreign developments had been adding to the difficulties of
achieving the overambitious industrial and military goals. Western
export controls on the shipment of strategic goods into the bloc had
been impeding the planned development of the military sectors of the
economies.

In any event, a close examination of the new actions proposed by the
Malenkov regime to improve the consumer's lot, insofar as they have
been revealed, indicate that plans for heavy industry and for military
preparation will not be materially affected.


=The "New Economic Courses"=

During the summer and fall of 1953, Communist governments all over
Eastern Europe announced in turn so-called "new economic courses."
East Germany announced its "new economic course" on June 11, just
before the East Berlin riots of June 17. Then came Hungary (July 4),
the U.S.S.R. (August 8), Rumania (August 22), Bulgaria (September 8)
and Czechoslovakia (September 15). Smaller adjustments were announced
earlier for Albania, and later for Poland.

The announced programs differed according to local problems, but almost
everywhere the solution of agricultural troubles was a key objective.
Better collection and distribution facilities for farm products were
demanded. This theme was almost invariably played to the popular tune
of helping the consumer--especially in the U.S.S.R. Deplorable housing
conditions came in for a share of the attention.

In the satellites the programs reflected openly the inability to meet
many of the exacting goals that had been set. In some countries,
the emphasis was on bigger industrial investments in scarce basic
materials. In others, concessions to the peasants were paramount. The
initial implementation, as well as some of the program announcements,
was confusing and sometimes contradictory.


=Malenkov's Big Announcement=

The new economic course for the U.S.S.R. itself was unfolded in three
major speeches during the second half of 1953--by Malenkov in August,
Khrushchev in September, and Mikoyan in October--and in a series of
decrees and lesser pronouncements.

Premier Malenkov, addressing the Supreme Soviet on August 8, made
repeated claims of Soviet strength and progress. For example, he said
the United States had no monopoly on the hydrogen bomb and added that
such facts "are shattering the wagging of tongues about the weakness
of the Soviet Union." But in the section on consumer goods he gave a
revealing picture of weakness.

He spoke at great length about lags and failures in agriculture and
in the manufacture of consumer articles. He severely criticized the
poor quality and appearance of goods, the "serious shortcomings" in
the organization of domestic trade, the "unsatisfactory leadership
of enterprises," the "high production costs" and high prices of coal
and timber, the "neglected state" of agriculture in many districts,
the "serious lagging" in livestock, potatoes, and vegetables. He said
the Government considered it "essential to increase considerably" the
investment in consumer industries.

     The urgent task [Malenkov said] lies in raising sharply in 2 or
     3 years the population's supply of foodstuffs and manufactured
     goods, meat and meat produce, fish and fish produce, butter,
     sugar, confectionery, textiles, garments, footwear, crockery,
     furniture and other cultural and household goods; in raising
     considerably the supply to the population of all kinds of consumer
     goods.

The program was to be accomplished in "2 or 3 years," and this was
later repeated in other official statements. In other words it was to
be a relatively short-term program of expansion, hardly long enough to
make a major shift in industrial emphasis--nor did Malenkov claim such
a shift. He said, "We shall continue to develop, by all possible means,
heavy industry and transport.... We must always remember that heavy
industry constitutes the basic foundation of our socialist economy,
because without its development, it is impossible to insure further
growth of light industry, increase productivity of agriculture, and the
strengthening of the defensive power of our country." Taking up this
theme, the Communist propagandists in the U.S.S.R. and the satellites
have constantly assured the people that they should not interpret
the "present tasks of the economic policy as a retreat from the
Marxist-Leninist principles of building up socialism." The continued
growth of basic industries was declared to be essential.

The assertion was made, not that the consumer program would displace
basic industrialization, but that both could progress simultaneously.
Malenkov said that heavy industry had risen from 34 percent of the
total industrial output in 1924-25 to 70 percent in 1953. And while
that was going on, he said, the U.S.S.R. was unable to develop light
industry (textiles, garments, shoes) and the food industry at the same
rate as heavy industry. But now, he said, the Nation was at last able
to develop those industries rapidly.

This "now-we-are-strong-enough" theme runs all through the Communist
propaganda on the subject. But it doesn't harmonize with existing facts
and figures.

In the first place, though the Soviet Union has made large industrial
gains, it has not built its industrial base anywhere near the long-term
goals that Stalin set in 1946 for the ensuing 15 years or so--goals
which, even if attained, would not bring the U.S.S.R. in most respects
to the production levels which the United States has already reached.

In the second place, the "now-we-are-strong" theme seems to leave
out of account the truly deplorable condition of Soviet agriculture.
Malenkov himself said a drastic increase in consumer goods could not
be achieved without "further development and upsurge" of agriculture,
because agriculture "supplies the population with food and light
industry with raw materials."


=Khrushchev and the Livestock Lag=

On the condition of agriculture, Nikita S. Khrushchev had a great
deal to say at a session of the Communist Party's Central Committee
on September 7. Khrushchev is the First Secretary of the Party. His
speech was an even more dismal confession of the "serious lag" than
Malenkov's. He revealed that the Soviet Union had 10 million fewer
cattle at the beginning of 1953 than in 1928, and that the number fell
by 2,200,000 during 1952 alone, instead of increasing by that same
number as planned. In biting words he described the sharp decline in
pork production and in wool, the unsatisfactory fodder situation, the
deficiencies in potatoes and vegetables. His speech showed beyond doubt
that even the production of grain, traditionally the Soviet Union's No.
1 food staple and No. 1 export commodity, was in bad shape and that a
far greater acreage needed to be devoted to feed grains in order to
bolster the faltering livestock industry.

Khrushchev listed a number of measures to raise production. They
included higher farm prices for livestock, milk, butter, and
vegetables; the reduction of obligatory deliveries from the small
private plots still held by collective farm members; the assignment
of more tractors and more skilled workers to the collective farms;
and _the tightening of Communist Party control over agriculture_. The
decisions to place greater reliance on material incentives and to give
slightly more recognition to what remains of private enterprise were
intriguing, but the collective farm system itself remained basically
unchanged.

Students of the Soviet economy, surveying previous efforts to stimulate
agriculture and especially mindful of the biological limitations on the
reproduction of livestock, were doubtful that the new measures could
bring anything like the planned increase in 1954 or 1955.


=Mikoyan Advertises the Program=

Anastas I. Mikoyan, the Soviet Minister of Domestic Trade, then made a
speech October 17 before the All-Union Conference of Trade Workers.

Mikoyan, as the man in charge of large segments of the consumer goods
program, enthusiastically described the program as "gigantic". In the
manner of Malenkov and Khrushchev, he also enthusiastically flayed
an astonishing number of deficiencies in the production, packaging,
distribution, and marketing of consumer goods. He even condemned dull
advertising slogans and inconsiderate retail clerks, and said there
were some things about capitalist business methods that were worthy of
emulating.

He stated, too, that not only the Ministry of Consumer Goods Industry
but other ministries--including aircraft and defense--were getting
assignments to produce such things as refrigerators, washing machines,
metal beds, bicycles, and radio and television sets. Actually, small
quantities of durable consumer goods have always been produced by heavy
industry ministries. Mikoyan's statement was, no doubt, intended to
sound as if these ministries were being transformed, but there is no
evidence that the U.S.S.R. actually planned to reduce its production of
aircraft and armaments to make way for household appliances. If such
evidence shows up, the free world will welcome it.

Mikoyan gave a few figures on the production of household appliances.
They revealed plans for large percentage increases, but even if
achieved, these increases would still leave the consumer many years
behind. For example, he said the output of refrigerators would rise
from 62,000 in 1953 to 330,000 in 1955 (for a population of more than
200 million). This, even if achieved, would still be tiny by Western
standards.

In August, Premier Malenkov had spoken cordially of the expansion
of trade of the U.S.S.R. with Western countries but he had avoided
connecting this with consumer goods. Now, however, the following brief
passage appeared in the middle of Mikoyan's long and rambling speech:

     A few words must be said about the import of consumer goods.
     During recent years we have been making use of this additional
     source of supply for the population. Having become better off we
     can now allow ourselves to import such foodstuffs as rice, citrus
     fruits, bananas, pineapples, herrings, and such manufactured goods
     as high standard woolens and silk fabrics, furniture, and certain
     other goods supplementing our range. These goods are in demand by
     the population.

     Although we are buying 4 billion rubles' worth of consumer goods
     from abroad this year, two-thirds of this sum will be spent on
     goods from the People's Democracies. In turn, we are exporting
     certain consumer goods of which we have a sufficiency, and are
     helping the People's Democracies with certain commodities.

Mikoyan, revising his figures in December, estimated the Soviet Union's
imports of consumer goods from non-Communist countries in 1953 at 1
billion rubles. Rubles are not used in foreign trade and translation
into dollar values may be misleading, but at the official (although
artificial) rate, 1 billion rubles would be 250 million dollars. This
is a slender figure in relation to the annual consumption needs of
more than 200 million persons. Even so, the amount that was actually
imported during the year did not equal the $250 million estimate.

There is, however, some connection between the new regime's promises of
more consumer goods and the recent activities of the Soviet Union in
the field of East-West trade. We shall be examining those activities in
the next chapter.


=Has Stalin Been Overruled?=

In early 1954 the situation could be summarized something like this:

The Soviet-bloc rulers have put on a more affable diplomatic face and
made a number of conciliatory gestures to the Western world without
altering their fundamental hostile objectives, and they have made a
great fanfare about supplying more consumer goods to their people
without basically changing their war-oriented economy.

The conciliatory diplomatic tactics of Stalin's successors have
sometimes been called a "peace offensive," but the term is hardly
justified. Since last June the peaceful sounds have alternated
curiously with renewals of the old name-calling and intransigeance.
And behind their Curtain the Communists never stopped teaching their
students that capitalistic society must be overthrown. The North
Atlantic Council could not avoid the conclusion at Paris on December
16 "that there had been no evidence of any change in ultimate Soviet
objectives and that it remained a principal Soviet aim to bring about
the disintegration of the Atlantic alliance."

The evidence indicated that the Communist rulers, while making
gestures to their multitudes, were trying not to interfere with
industrial-military development.

The evidence included the Soviet Union's own budget figures, which
indicated that the state investment (there is no private investment) in
consumer goods ministries is still extremely small; that the extremely
large specific allocations to the military in the 1953 budget were
no lower than actual expenditures in 1952; and that the budget's
"unexplained" category, which almost certainly includes "sensitive"
military projects, greatly increased.

It seemed most unlikely that increases in domestic output of consumer
goods, even supplemented by increased imports, could be large enough
to make a substantial improvement in the traditionally low living
standards in the Soviet Union.

We must suppose that the intent of any steps to improve the lot of
the Soviet-bloc consumer is to improve it just enough to rescue his
productivity in the interest of the state, but not enough to give
him such a taste of better living as would lead to a wider and wider
opening of the valves and hinder the buildup of the totalitarian war
economy.

If that is a correct assumption, the world, yearning for assurance of
peace, is entitled to wish that the Kremlin's calculations might be
upset and the consumer might get enough to whet his appetite in a big
way.



_CHAPTER III_

=The Kremlin's Recent Trading Activities=


In midsummer of 1953, at about the time of the Korean armistice of July
27 and just before Malenkov's major speech of August 8, the Soviet
Union attracted world attention by a flurry of new trade agreements
with non-Communist countries. There was another flurry around the end
of the year.

During the last 9 months of 1953 and the early part of 1954, the
representatives of U.S.S.R. adopted a somewhat more polite and
businesslike manner in their commercial dealings with the free world.
They not only _said_ they wanted more trade (they had never stopped
saying it) but they took more steps to bring it about. Besides trade
agreements, they signed more contracts with private firms. In Moscow
they warmly entertained traveling salesmen from the West. In Western
capitals they staged a few cocktail parties and press conferences. They
poured more funds into eye-catching exhibits at "trade fairs" from
Copenhagen to Bangkok. They made grandiose offers to buy, and gave
them great publicity. Some offers to buy, sell, or barter they made
quietly through commercial channels. They showed signs of wanting the
nonindustrial portions of the world to regard them as a helpful "big
brother" bringing both trade and aid.

These activities, which many writers have called a "trade offensive,"
carried with them important meanings for the free world. In this
chapter we shall examine the activities and probe for the meanings.


=The New Trade Agreements=

In a period of about 3 weeks, in late July and early August, the
U.S.S.R. concluded trade agreements with France, Greece, Argentina,
Denmark, and Iceland. These were not mere renewals of expiring
agreements. The U.S.S.R. had never before had trade agreements with
France, Greece, or Argentina (or any other Latin American country). Its
last trade agreement with Denmark had expired in 1950, and with Iceland
in 1947. Its trade with three of the countries, Greece, Iceland, and
Argentina, had been almost nonexistent in recent years. Considerable
trade, however, had been carried on with France and Denmark without
benefit of trade agreements.

The U.S.S.R. also renewed existing trade agreements with Iran and
Afghanistan and signed a "payments agreement" with Egypt. Most of these
trade agreements signed during the summer of 1953 became effective as
of July 1.

The second group of trade agreements, clustered shortly before or
after January 1, 1954, and mainly effective as of that date, was with
India, Belgium, Norway, Sweden, and Finland. It was the first time the
U.S.S.R. had ever had a trade agreement with India. There had not been
one with Belgium since 1951. The others were renewals. Barter deals
were also made with some of the countries already mentioned, and with
Israel and Japan.

Not since 1948, when the U.S.S.R. had entered into annual or long-term
trade agreements with eight countries of Western Europe, had there been
a period of Soviet trade-agreement activity that could compare with the
paper blitzkriegs just described. And the result was that in the early
part of 1954 the U.S.S.R. had trade agreements with more free-world
countries than at any other time in the postwar period.

This fact and the hefty amounts of trade which were called for in
some of the agreements have given many people the impression that a
historic increase in the size of East-West trade was taking place. The
impression seems hardly justified.

In the first place, trade agreements are usually only hunting licenses.
They merely authorize--but do not guarantee--the exchange of goods.
The governments agree to permit the export and import of the types
listed--if contracts can be arrived at between Soviet monopolies and
Western business. If the goods turn out to be unavailable, or if
the demand is not forthcoming, or if the price is too high or the
quality too low, the publicized amounts of the trade agreements do
not materialize in the export-import statistics. And this fact rarely
receives as much public attention as the original announcement. To
illustrate, a spokesman for the Greek Foreign Ministry told the press
on January 19 that the U.S.S.R. had lagged far behind in shipments
under the 1-year trade agreement of July 1953. That agreement had been
publicized as calling for trade of $10 million each way, but the Greek
official said few Russian deliveries had been made and "it will be a
miracle" if these deliveries reached $3 million.

In the second place, even a big percentage of fulfillment would not
necessarily increase trade between the U.S.S.R. and the free world
to the high points of 1948 and 1952. The 1948 turnover--that is, the
sum of exports and imports--had been about $1 billion. It declined
to $545 million in 1950. By 1952 it was back up to $943 million. The
preliminary estimate for 1953 is $790 million. Thus the year which saw
the Kremlin's new trading tactics was also the year that saw a slump
of about 16 percent in the dollar value of its trade with the free
world. The trade was rising moderately in the last part of 1953 and a
further moderate rise in 1954 would not be surprising.

[Illustration: FREE WORLD TRADE WITH THE SOVIET BLOC]

But there is still another reason why the new Soviet trade arrangements
will not necessarily mean a historic upsweep in East-West trade: The
satellite countries have not been behaving in quite the same way.

The U.S.S.R. is only one part of the Soviet bloc, albeit the center
of power. The U.S.S.R. accounts for about 30 percent of the trade
which the European Soviet bloc carries on with the free world. (The
percentage would be still less if Communist China were included, but
Communist China will be discussed in another chapter.) In other words,
Czechoslovakia, Poland, Hungary, the Soviet zone of Germany, Rumania,
Bulgaria, and Albania, despite the long, steady decline of their trade
with the free world ever since "sovietization" took hold in about
1948, still exchange about twice as much merchandise with free-world
countries as does the U.S.S.R. These satellites, or some of them, have
long had trade agreements with countries in Western Europe. During the
last year or so they have renewed about 45 of those. In addition they
renewed about a dozen agreements with non-European countries.

The brand-new agreements which the satellites concluded in Europe were
mainly with France and Greece, thus conforming to the Soviet pattern
of increased attention to those two countries. But in other respects
the satellite trade pattern was different from that of the U.S.S.R.,
for while recent U.S.S.R. commitments, if fulfilled, seem to indicate
increased trade, there was no evidence of a reversal in the long
slide of the East-West trade of the satellites. Therefore one could
not ignore the possibility that the U.S.S.R., with a flourishing of
fountain pens and a blare of trumpets, was merely shifting to itself a
bigger percentage of all bloc trade with the rest of the world.

Now let's see what kinds of goods are involved in the new trade
agreements and other commitments that the U.S.S.R. has been making.


=More Consumer Goods Ordered=

Consumer goods, the items about which Malenkov, Khrushchev, and Mikoyan
made such a fanfare in announcing the new course for the Soviet
domestic economy, make up one class of commodities, though not the most
important, that the U.S.S.R. has been ordering from the Western world.
It appears that the U.S.S.R. has committed itself to buy consumer goods
at a somewhat brisker rate than in recent years.

Most of these consumer goods were food items. During the last 6 months
of 1953 and the first month of 1954, the known Soviet arrangements to
buy food from the free world amounted to about $90 million. Some of the
deliveries were scheduled in 1953, some in 1954.

Butter was the biggest item. In trade agreements and contracts, butter
quotas amounted to 37,500 tons, with an estimated value of $40 million.
Denmark was to provide about $18.6 million of this. The second most
important source of butter was to be the Netherlands, with $13.7
million. Lesser amounts were to come from New Zealand, Australia,
Sweden, and Uruguay.

Meat quotas came to about $22 million, with Denmark and Argentina the
leading suppliers. Smaller amounts were to come from the Netherlands,
Uruguay, and other countries.

Fish quotas amounted to $15 million. Nearly all of this was herring.
The leading suppliers were to be Iceland and Norway, and others were
the United Kingdom, the Netherlands, and Denmark.

The U.S.S.R. during the 7-month period also arranged to buy $7 million
worth of citrus fruits from Italy, Japan, and Israel (and apparently
made a whopping profit selling oranges to the Russian people); $4
million worth of cheese from Argentina and the Netherlands; $2.4
million worth of lard from Denmark and Argentina; and $1.4 million
worth of sugar from the United Kingdom and Cuba.

Besides food, the most important consumer item ordered from the West
was textiles. The amount is harder to estimate, but it was somewhat
larger than the Soviet textile imports of any recent year. The
principal suppliers were to be Belgium, France, the Netherlands, Italy,
and the United Kingdom.

In addition to contracts already made, the Soviet officials were still
putting out feelers for consumer goods. Some of them reached across
the Atlantic. In January much publicity was given to the efforts of
an American firm to buy a large quantity of Government-owned surplus
butter and sell it abroad--ultimate destination Russia.

Secretary of Commerce Sinclair Weeks announced on January 15 that he
would not approve any application "which would permit an exporter to
buy butter at considerably lower prices than those paid by the American
housewife and then send that butter into Russia." On February 10 he
announced that it had been "decided as a matter of policy to deny
commercial export license applications for the export for cash of
United States Government-owned surplus agricultural or vegetable fiber
products to Russia or her satellites." He pointed out, however, that
this ban "does not preclude study of export license applications for
these nonstrategic products to the Soviet bloc if acquired by exporters
in the open market and not from the Commodity Credit Corporation
surplus stocks."

It is difficult at this writing to compare the Soviet Union's new
commitments to buy consumer goods with the actual imports of previous
years. _Total_ free-world exports to the U.S.S.R. in 1953 are estimated
at $410 million (compared with $481 million in 1952) but how much of
this $410 million was consumer goods is not yet determined. The 1954
figure can only be speculated upon. But certain generalizations about
consumer goods are possible.

As evident in chapter 1, the U.S.S.R. was never very much interested
in importing consumer goods from the West. The items it did import
for the consumer were not the household appliances and luxury items
we sometimes think of as consumer goods--but were usually food. These
imports have been higher at times than others: for example they were
relatively high in the late 1930's and again in 1948. Since 1950
they have been rising again, but by 1953 they were still breaking no
records. They have always represented a relatively small percentage
of total Soviet imports. At the same time, during the postwar years
Soviet policies were forcing the consumer-goods imports of the European
satellites steadily downward.

These contrasting trends of rising Soviet imports and sinking satellite
imports seemed likely to continue in 1954. This probability, plus
Mikoyan's statement in his October speech that "we are helping the
People's Democracies with certain commodities," made one wonder how
much of the new Soviet imports of butter and other food were being
reshipped to Eastern Germany and other satellites to alleviate the
unrest there.


=A Shopping Spree for Ships=

The U.S.S.R., while ordering more consumer goods, seemed even more
anxious to buy ships.

Every trade agreement which the U.S.S.R. has signed with a shipbuilding
nation of Western Europe since mid-1953--that is, with Finland, Italy,
Belgium, the Netherlands, Denmark, France and Sweden--has included a
sizeable quota for ship purchases, particularly fishing vessels and
refrigerator ships. Contracts for fishing vessels were also made with
firms in the United Kingdom and Western Germany.

It was safe to say that Soviet activity with respect to Western
European shipyards since mid-1953 surpassed the biggest previous
shopping expedition for ships, which came around 1949. And it was clear
that by early 1954 the U.S.S.R. had greater commitments on the books to
buy ships from the West than at any other time in its history. This was
true in tonnage, value, and number of vessels.

Probably not all the trade agreement commitments will result in actual
deliveries; on the other hand, the shopping spree is still going on and
further commitments are likely.

Because of Western restrictions on the export of certain types of
ships, the new vessels destined for the Soviet Union were mainly of
smaller types. A large number were fishing vessels, such as trawlers,
fish processing craft, and refrigerator ships. Others were cargo ships,
tugs and barges.

The buying of fishing vessels accords with the shortage of food in the
Soviet bloc. Mikoyan in his October speech admitted there had been many
complaints about the fish supply and that the Soviet fishing goals
had not been met. But the Soviet search for ships could not be viewed
entirely in the light of a desire to produce more consumer goods. The
U.S.S.R. was seeking cargo ships in addition to fishing boats, ordering
other marine equipment such as component parts and floating cranes and
trying to arrange for more ship repairs in free-world ports. Western
shipbuilders were inclined to be receptive to orders for vessels at a
time when ship orders from Western countries were declining. At the
same time it was impossible to ignore the fact that Soviet-bloc orders
in the West can have the effect of freeing Soviet-bloc shipyards for
the building of naval vessels. The campaign to buy ships thus presented
the free world not only with more orders but also with a security
problem.

The development of a Soviet merchant fleet is relatively recent. In
1939 the U.S.S.R. had seagoing merchant vessels totaling only 1,135,000
gross tons. It emerged from World War II with more than twice this
tonnage. The main sources of the increase were lend-lease ships from
the United States and war reparations. The United States in its
lend-lease program leased to the U.S.S.R. 121 merchant vessels with
gross tonnage of some 750,000 tons. Of these, 30 were returned to the
United States and 4 were lost. The U.S.S.R. kept the others, and long
exhaustive negotiations since 1946 have failed to settle this and
other lend-lease claims. Through war reparations the U.S.S.R. acquired
170 more ships with gross tonnage just over one-half million tons. By
1953 the Soviet bloc--the U.S.S.R. and Poland for the most part--had
a seagoing merchant fleet with a gross tonnage of 2-1/2 million tons,
compared with free-world fleets totaling about 21 million tons.


=Most of All, They Want Hard Goods=

The new Soviet purchases of butter, meat, and other consumer items have
sometimes obscured the continuing heavy demand for equipment and raw
materials needed for industrialization. There has been no appreciable
decline in the Soviet interest in buying industrial commodities. Such
goods still dominate Soviet imports and new agreements to import--and
that goes for the European satellites, too.

The Soviet bloc has shifted some of its priorities. The Soviet
eagerness to buy ships is an example of a raised priority. The sharp
drop in Soviet buying of Malayan rubber from the United Kingdom in 1953
was an example of a lowered priority. There are some other changes, but
no change in the emphasis on industrial goods in general.

All the trade agreements concluded between countries of Eastern
and Western Europe since mid-1953 have included quantities of such
items--limited, of course, by the West's security controls which
provide for the embargo of some items and quantitative restrictions on
others. In the trade agreements of Czechoslovakia and Poland, we find
quotas for deliveries from the free world of electrical equipment,
ball bearings, steel products, pyrites, lead, zinc, aluminum, and
many others. Bulgaria also has shopped for capital equipment. In
exchange for their grain, vegetables, fruits, tobacco, and a small
amount of manganese and chrome, the Bulgarians made trade-agreement
commitments to get important amounts of cables, rods, bars, plate
steel, railroad equipment, floating cranes, electrical machines and
installations, mining equipment, and miscellaneous machinery. The
U.S.S.R., besides its procurement program for ships, has written into
its trade agreements certain kinds of machine tools, various kinds of
steel, equipment for electric power plants, construction equipment,
chemical products, textile machinery and machinery for the timber and
food-processing industries. An analysis of one recent trade agreement
showed that three-quarters of the value of the Soviet imports consisted
of products of the metal working industries. Businessmen in the United
Kingdom, which has concluded no recent trade agreement with the
U.S.S.R., have reported that the Soviet bloc's real interest in buying
British goods was confined mainly to items for production.

The attempts to purchase items like those named in the foregoing
paragraph are nothing new. The point is, these efforts are continuing.

Many of these items have been under quantitative controls by the
major free-world countries--that is, exported to the bloc in limited
quantities only. Some of the most highly strategic items, such as
the types of machine tools and bearings that are essential to war
production, have been under embargo, and when that was true, the
free countries that participate in the international control program
have generally shipped them only to fulfill commitments made before
controls went into effect, or in special cases where the countries felt
strongly that the shipment was justified in view of the benefits to the
free world that resulted from the two-way trade made possible by the
shipment. In 1952 and 1953, for example, all nations receiving aid from
the United States permitted the shipment to the Soviet bloc of roughly
$15 million in items that were listed for embargo under the Battle Act
(Mutual Defense Assistance Control Act of 1951), as compared with total
free-world shipments to the bloc of about $2.7 _billion_ in the same 2
years.

These highly strategic items, of course, are the ones which the
countries of the Soviet empire have wanted most of all. And when not
able to get them legally, they have continued their efforts to get
them illegally. The third semiannual Battle Act report, _World-Wide
Enforcement of Strategic Trade Controls_, contained a detailed account
of the underground trade that violates Western regulations. Since all
foreign trade of a Soviet-bloc country is a state monopoly, it follows
that the state is an active participant in this underground traffic.
With the bloc, circumvention is an official policy.

The Soviet Union, despite its publicized buying of consumer
goods--which have never been restricted by the free world--has
definitely not slackened its efforts to obtain industrial goods whether
strategic or nonstrategic in nature.


=Something Different in Soviet Exports=

As told in chapter I of this report, the economic planners of the
Soviet empire first figure out their import requirements and then
decide what they want to export in order to pay for the imports. They
look upon exports primarily as a means of obtaining goods which are
more advantageous to import than to produce, or which they cannot
produce.

In the present chapter, we have seen what sort of items they are
currently interested in importing. Now we turn the coin over and look
at the export side.

The most noticeable feature is that the U.S.S.R. in the last half of
1953 and the early part of 1954 introduced into free-world markets a
number of mineral products which they had not sold in such quantities
for some years.

These commodities included manganese, petroleum, and gold. All of
them at one time or another have been among the major Soviet exports.
Together with grain, timber, and furs, they make up the principal means
that the U.S.S.R. possesses to procure the imports they want.

Why have the mineral exports been revived at this time? This leads us
to the grain situation.

Grain has long been the Soviet Union's No. 1 export commodity, and
still is. But Soviet grain shipments declined precipitately in 1953.
The United Kingdom, usually the main Western customer for this
commodity, stopped buying grain on a government-to-government basis
and turned the purchasing over to private firms. At the same time
the U.S.S.R. apparently decided to keep more of its grain stores at
home. The efforts to furnish more fodder to livestock, together with
below-average crops and collective-farm headaches in the U.S.S.R. and
satellites, suggest the motivation for this. At any rate the private
British firms were unenthusiastic about signing large contracts at the
high prices set by the U.S.S.R., and grain shipments to the United
Kingdom skidded from $101 million in 1952 to only $10.1 million in 1953.

Although grain was far from disappearing as a Soviet export to the
West, it became less potent--for the time being, at least--as a means
of acquiring foreign exchange to pay for imports. This loss was only
partially offset by a moderate increase in sales of Soviet timber
to Britain and a big drop in the amount of Malayan rubber that the
U.S.S.R. bought from the British. Meanwhile war reparations from
Finland had ended in 1952, and deliveries of Swedish goods under
a long-term credit agreement ended the same year. The Finnish and
Swedish developments meant that about $80 million worth of goods which
the U.S.S.R. had received from those countries in 1952 could not be
duplicated in 1953 unless some other means of payment were created.
All these events contributed to the reviving of some other export
commodities.

How far the shift is going and how long it will continue cannot be
predicted. Abrupt alteration in Soviet exports is hardly a novel
development. For a time, around 1930, when forced collectivization of
agriculture and forced exports of grain had induced famine in some
areas of the U.S.S.R., the Kremlin opened the pressure valves a mite,
heavily slashed the exportation of grain, and even _bought_ some grain
on the Baltimore exchange. That was a breathing spell in the midst
of the first big Soviet push toward rapid industrialization. During
the same general period, the U.S.S.R. found it expedient to force
more production and more exports of furs, coal, and some of the same
commodities now receiving special attention--petroleum and metallic
ores--in order to get imports of capital goods needed in the ambitious
industrial program.


=They Have Dug Up Manganese=

Manganese is a silvery-white metal used in the making of hard steels.
The U.S.S.R. is one of the world's major sources of manganese. It can
produce a large amount each year, depending on how much manpower it
decides to throw into the effort. It consumes a lot in its own steel
industry, even using manganese as a substitute for scarcer alloys like
nickel and molybdenum. In addition, its plans usually provide for
certain quantities of manganese ore to sell abroad.

These exports have continually fluctuated. Before the war they ranged
from about 400,000 metric tons a year to about 1 million. The United
States, which produces very little manganese, was a major customer. In
the 1930's we got about 40 percent of our manganese imports from the
U.S.S.R. Other important customers were France, Germany, Belgium, and
Japan.

During the war, Soviet manganese vanished from world markets. The
United States and other customers turned to sources in Africa, Latin
America, and India.

In March 1945, Soviet manganese ore reemerged. The United States
was the principal buyer, receiving 1,168,000 tons in about 4 years.
In February 1947 the Soviet Foreign Trade Journal pointed out the
importance of the United States to future Soviet plans for the export
of manganese. But late in 1948 the Kremlin suddenly reduced its
shipments to the United States almost to the point of embargo. A few
shipments trickled in during the next 2 years and stopped entirely
in 1951. Meanwhile deliveries to Western Europe did not undergo a
compensating rise; they were little more than 100,000 tons a year.

Came the season of the last half of 1953 and the early part of 1954.
The Kremlin's zeal for exporting manganese bloomed again. Commitments
to ship over 300,000 tons of the ore were written into trade agreements
with Western European countries. Offers of manganese reached the United
States through various channels.

Chrome is usually part of the package when manganese is sold. As could
be expected, Soviet chrome commitments also climbed in late 1953.

There was also a revival of activity in the export of silver, platinum,
and palladium.


=The Emergence of Russian Oil=

But a more interesting commodity which the U.S.S.R. has begun to put on
the market in bigger quantities was oil.

In approximately the last half of 1953 the U.S.S.R. made agreements
to ship to free-world countries about 3.5 million metric tons of
crude petroleum, kerosene, diesel fuel, and other petroleum products.
The countries due to receive the largest amounts--if delivered--were
Finland, France, and Argentina. Other customers were Greece, Italy,
Iceland, Denmark, Sweden, Israel, and the Netherlands. Some deliveries
were made in 1953; more would be made in 1954; there was no certainty
that all the commitments would be fulfilled. But even a two-thirds
fulfillment apparently would be enough to hoist petroleum ahead of
lumber and furs and place it second only to grain among Soviet exports
to the free world.

What would this mean to the free world? What problems would it raise?
Again we can find clues in the past. The present situation is not the
first time that the U.S.S.R. has created a stir by abruptly entering
oil markets. This also happened in the late 1920's, when the U.S.S.R.
began exporting large amounts of oil as a means of obtaining industrial
imports. These exports grew each year and were 6.1 million metric tons
in 1932. This was around 10 percent of the world's oil exports, and
was almost 30 percent of Soviet oil production at the time. The United
Kingdom and Italy were the major customers for this oil, but there
were many others. The marketing was done through various channels. The
Soviet monopoly that controlled all oil exports set up a network of
sales offices abroad. Long-term contracts were made in Spain, Italy,
France, Belgium, and the Netherlands.

The expansion of Soviet oil sales gave rise to bitter price wars
with established oil groups. The bitterness was made more intense by
the fact that the Bolsheviks had neglected to settle for the foreign
oil properties that they had seized after the revolution. As in all
exports, the U.S.S.R. was more interested in total receipts of foreign
exchange than in making high per-unit profits; so it could and did use
price cutting as a means of achieving a foothold. Subsidiaries of some
of the world oil trusts then tried to drive the Soviet oil back home by
underselling the Soviet monopoly. But the attempts failed, and Soviet
oil won an important place in world markets.

In the late 1930's, the oil was withdrawn. Soviet exports dropped back
to 1.4 million tons in 1938, and kept fading. After the war, they came
back only in a trickle--for example, 100,000 metric tons in 1951 and
250,000 in 1952, then rising to 450,000 in 1953 as some of the new
commitments of 3.5 million tons began to be fulfilled.

Meanwhile the war had swept additional oil into the Kremlin's hands,
including the oil wells of Rumania and those which were taken over as
"German assets" in the Soviet zone of Austria. And the oil exported to
the West from these new Eastern European acquisitions greatly exceeded
the exports of the U.S.S.R. itself, amounting to 1.2 million metric
tons in 1951, 1.7 million in 1952, and 2.3 million in 1953. In recent
months, while the U.S.S.R. was making agreements to ship 3.5 million
tons, the new export commitments of these other properties in Eastern
Europe became known only in part, at least at this writing.

The Soviet bloc, though still short of certain specialized refined
products, probably has the oil capacity to make considerable exports
for at least some years, if the Kremlin so decides. Whether the bloc
will indeed step into the world markets in an important way, as
the U.S.S.R. did in the twenties, is of course not known. The West
is watching closely to see whether the Kremlin will again use its
monopoly control to undertake a major campaign of underselling other
suppliers in world markets.

It was natural for oil-importing countries in the free world to be
interested in new supplies from the Soviet bloc, especially if the
price was attractive or if the transaction also enabled a free country
to market its own products in the East. But the West could not forget
past patterns, nor ignore the problems brought by new Soviet sales.

When the Russians abruptly disappear from markets, free-world importers
turn to free-world sources to make up the difference. And if the
importers later jump whenever the Soviet Government decides to stage
another of their dramatic entrances, the free-world sources whose
production has been stimulated will be the losers. And who can predict
when the dictates of the Kremlin--economic or political--will override
the dictates of the market place, and the oil, manganese, chrome, or
whatever it may be, will suddenly be whisked out of reach?


=Gold Sales Expanded=

Down through the centuries, the word _gold_ has exerted a powerful
effect upon the imaginations of mankind. And last December, when the
news came out that airplanes laden with gold bullion were flying from
Moscow to London, there was a great buzz of interest. What were the
Russians up to now?

The export of Russian gold was not new. The Soviet Union had been
selling a sizeable amount each year in the free world. But in the last
few months of 1953 a larger amount of Russian gold came out into the
free world than had emerged in any recent year. Most of it, instead of
entering the free market, went to the Bank of England. The total amount
exported to England, Switzerland, and other countries during 1953 was
not announced, but it was somewhere between $100 and $200 million.

There has been much speculation on the reasons for an increase in gold
sales. The best explanation seemed to be that the Kremlin, hard pressed
for adequate exports, decided--as in the case of manganese and oil--to
use a fraction of its gold hoard so that it could continue to import
the things it wanted from the free world. It has done the same thing on
past occasions. For example, in 1928 the U.S.S.R. exported $167 million
worth of gold and in 1937, $212 million worth.

Whether still larger amounts of Russian gold would be exported in
the future was of course unknown. Concerning the size of the Soviet
gold stock many guesses have been made, most of them ranging from $3
billion to $6 billion. The Soviet Union attaches great importance
to its gold reserve. It has been willing to part with gold only in
limited amounts or for special purposes. In any event, the gold hoard
would not be big enough to use as a base for a large-scale, long-term
trade relationship. Nevertheless, over the short run, and for limited
purposes, the U.S.S.R. could, if it desired, export a lot more gold
than it has to date. Gold therefore is an intriguing question mark of
East-West trade.


=Reaching Outside Europe=

Moscow, while shopping for more ships, peddling more gold, and making
other moves in the industrial countries of Western Europe, also reached
outside Europe and tried to fasten closer economic ties with Asia and
Latin America. The trade of the Soviet Union with the non-Communist
areas of Asia, and with Latin America, has never amounted to more than
driblets. That of Czechoslovakia and Poland has been a little bigger.
The U.S.S.R. entered this field in 1953 with a good deal of propaganda
effect. The effect in delivery of goods was still to be seen.

The Soviet trade bosses used a number of devices.

One device was to offer loans and technical assistance. Some of the
loans were connected with trade. Others, related to construction
activities within free-world countries, were more suggestive of
investments and provided opportunity for increased Soviet or Communist
Party economic penetration. There was a marked interest in assisting
in the establishment of storage and supply facilities. So far, few
Soviet offers have been accepted. Possibly this is because they are
disturbingly reminiscent of the penetration techniques that were used
to gain economic leverage inside the Eastern European countries and
China prior to Soviet political domination of these regions. Or it may
be that skepticism has been aroused by the experience with Communist
Party use of commercial enterprises in some Western European countries
to finance the local party and the Kremlin's activities.

Another device has been to build lavish exhibits at "trade fairs."
This activity, though carried on in Western Europe too, was especially
marked in South Asia. On an increasing scale, since 1951, the Soviet
Union and its satellites have been using trade fairs for a double
purpose--to promote the kind of trade the bloc desires and to propagate
Communist ideas.

By elaborate and costly displays the Soviet-bloc governments seek to
dominate the fairs; to overshadow the exhibits of the United States and
other free-world countries; and to create the illusion of an industrial
and commercial superiority over the Western nations, especially the
United States. The U.S.S.R. makes a concerted and determined effort to
discredit and minimize the industrial and technological achievements
of the United States by contrasting the great size of the Communist
nations' participation with the usually modest representation by
United States firms. An important distinction between Soviet and
U.S. exhibits is that the former are developed as a state trade
promotion and propaganda undertaking, and involve the building of
special pavilions, whereas U.S. participation amounts to the sum total
of exhibits of individual U.S. industrial and commercial companies
assembled for the single purpose of promoting the sale of individual
products.

The importance which the bloc attaches to these undertakings is found
not only in the mountains of propaganda it issues on the subject,
but in the sizeable expenditures it makes. For example, in 1952
the U.S.S.R. and its satellites dominated the Bombay International
Industries Fair with four big exhibits. The Soviet exhibit was the
largest; it cost more than $200,000 and was manned by a staff of
40. Communist China's exhibit was the second most pretentious, with
Czechoslovakia and Hungary also participating in an impressive way. At
the Thailand Constitution Fair at Bangkok in December 1953, the Soviet
exhibit was again the most elaborate. The Soviet Government established
a special pavilion that cost an estimated $500,000 and housed 5,000
items, including trucks, automobiles, precision equipment, glassware,
rugs, and preserved foods.

Yet another device was to join hands with a key nation of each
continent in a brand-new impressive trade agreement which seemed to
offer attractive benefits to that nation and which might stimulate
neighboring countries to hanker after similar opportunities. The
Kremlin chose India and Argentina. The U.S.S.R. concluded trade
agreements with those two countries for the first time. So did some
of the European satellites, and other satellites renewed existing
agreements. The U.S.S.R. and the satellites also renewed existing
agreements with certain other countries in Asia and Latin America.

The two-year Russian trade agreement with Argentina, signed in August
1953, was one of the most interesting of the year. For one thing
it came at a time when trading missions of the U.S.S.R. and its
satellites were becoming more active throughout Latin America--and the
Soviet-Argentina agreement helped those missions to gain a somewhat
more receptive audience for their overtures. Latin American governments
have cooperated with other Western nations in withholding highly
strategic commodities from the Soviet bloc; for example, bloc proposals
to buy Chilean copper and Bolivian antimony and lead were not accepted.
Obviously the Kremlin hoped to bring about more resistance to the
control of strategic materials and to create Western disunity over that
issue.

This trade agreement between the U.S.S.R. and Argentina was also
interesting for its size and composition, at least on paper. It called
for deliveries of $60 million in each direction, presumably during the
first year, with an additional Soviet credit of $30 million. Argentine
shipments were to include wool, hides, linseed oil, meat, and other
goods that the Soviet Union could undoubtedly use. But the list of
Soviet exports included some items for which the Soviet bloc seemed to
have equal or greater need. The U.S.S.R. promised to deliver a large
quantity of machinery and transportation equipment on credit, as well
as petroleum, coal, and other items. Proposals to deliver certain kinds
of machinery also cropped up in Soviet agreements with India and Iran.

Machinery, as we know, is what the Soviet rulers go to extreme pains
to _import_. If they were serious now about exporting it, and if they
really intended to deliver large quantities and not mere tokens, it
would be something new, although even then they would probably not be
exporting the advanced types which they usually seek to obtain in the
West. It remained to be seen whether the U.S.S.R. would come anywhere
near to complete fulfillment of the trade agreement with Argentina,
for example. But one could only suspect that the promises of big and
attractive deliveries--whether fulfilled or not--were made in large
part for the purpose of weakening the ties of those countries with the
rest of the free world.

       *       *       *       *       *

In this chapter we have traced various threads of the Soviet trading
activities, and have suggested reasons why they engaged in each kind of
activity.

Now it is necessary to look more deeply into the whole complex of
Soviet foreign trade policy and sum up what's behind it all.



_CHAPTER IV_

=What's Behind It All=


From the Kremlin comes a continual flow of propaganda, spread to the
ends of the earth by the international Communist movement, to the
effect that the Union of Soviet Socialist Republics is the Champion of
Peace.

Stalin's death afforded the Communists a convenient opportunity to
portray a new regime zealous for a peaceful, normal world. They did not
say out loud that Stalin had been _less_ zealous, but they were not
reluctant to play upon the world's fervent wish that the new management
would turn over a bright new leaf. And they were willing, even eager,
for the world to believe that one part of the pursuit of peace was the
promotion of East-West trade.


=The Kremlin and Peace=

Can the so-called Soviet "trade offensive" of 1953-54 really be
explained as an effort to establish a just and lasting peace, as the
West understands the word? If we could believe that, the world might
suddenly seem a more comfortable place to live in. We must always
keep the door ajar for any genuine steps to abandon the Soviet brand
of imperialism, to abandon the basic unfriendliness of purpose toward
everything not under Moscow's control. The free world was looking for
such a movement at the Berlin Conference in the early part of 1954, but
it did not show up.

The only way peace could be accepted as a Soviet trading motive would
be to define peace as the Soviet leaders themselves have defined it in
the past, not in their propaganda but in their party teachings.

"The peace policy of the proletarian state," according to a Comintern
Congress resolution of 1928, "certainly does not imply that the Soviet
state has become reconciled with capitalism ... It is merely ... a more
advantageous form of fighting capitalism, a form which the U.S.S.R. has
consistently employed since the October Revolution."

Lenin, in a statement which was reprinted in 1943, said that "every
'peace program' is a deception of the people and piece of hypocrisy
unless its principal object is to explain to the masses the need for a
revolution, and to support, aid, and develop the revolutionary struggle
of the masses that is starting everywhere...."

There is no evidence that the new Soviet regime has overnight embraced
free-world ideas about peace and warfare. To the disciples of Marx,
Lenin, and Stalin, the world is always in a state of warfare. The
warfare waged by them is three-fold: psychological, economic, and
military. Military action is a last resort, but psychological and
economic action never ceases. Stalin did not invent this concept,
though he put it into action on a large scale. Nor was it exclusively
Russian. The German military philosopher, Clausewitz, whose mid-19th
century writings were carefully noted by Lenin and Stalin, wrote:
"Disarm your enemy in peace by diplomacy and trade, if you would
conquer him more readily on the field of battle."


=A Mixture of Motives=

Hence the question arises: Can the Soviet trade offensive be explained
as a campaign of "economic warfare"?

That depends on what is meant by economic warfare.

Paradoxically, many people think of economic warfare as meaning
economic action in which economic considerations are relatively
unimportant, and the gaining of political or psychological advantage is
dominant.

If economic warfare is taken in this sense, the answer to our question
is "no". The explanation of the Soviet trade offensive is not that
simple. The Soviet Union and its satellites have economic needs. They
use foreign trade to serve those needs. We have noted in this report
how they determine what imports they want from the free world, and then
develop a program of exports to pay for the imports. They are not in
the Olympian position of being able to pick and choose these imports
and exports solely on the basis of whether the choice will help them
deceive, confuse, embarrass, or divide the capitalistic West. Therefore
it is a grave oversimplification to assume, as some people do, that
the Soviet Communist's every action in the market places of the world
inevitably brings him advantages in international politics.

On the other hand it would be an even greater mistake to assume that
economic considerations always govern; that because the Soviet-bloc
governments often use normal trading channels and devices they must
be looking upon trade through the same eyes as the businessman of
Indianapolis, Manchester, or Stockholm; and that politeness at the
bargaining table is the undoubted mark of innocently "economic"
commerce, free of ulterior motives.

The truth is: Soviet-bloc trading actions are neither purely economic
nor purely noneconomic.

The Soviet trade offensive can be explained in terms of economic
warfare, if we define economic warfare as economic action by the state
that is designed to serve basic hostile objectives directed at another
nation or group of nations--whether or not the immediate gains are
economic.


=Their Objectives Haven't Changed=

In Chapter I, the Soviet bloc's long-term objectives in its economic
relations with the free world were outlined. It was pointed out that
these objectives have a dual character: strengthening the bloc and
weakening the free-world powers. The objectives were summarized this
way:

       1. To feed the economy, especially the industrial-military base,
     with imports that help the bloc become more powerful and less
     dependent on the free world.
       2. To drive wedges among free-world nations at every opportunity.
       3. To increase the reliance of free-world nations on the bloc
     for markets or supplies, and thus make the free world more
     vulnerable to bloc pressures.

Within this broad framework the Kremlin pursues more immediate and
specific goals, such as:

# Obtaining through normal commercial channels the ships, machinery,
and other industrial goods which they can produce only at relatively
high expenditure of labor and resources--or which they cannot produce
at all.

# Obtaining through illicit channels those strategic materials whose
shipment is restricted by free-world governments in the interest of
their national security.

# Forcing the relaxation of free-world security controls in order to
get strategic goods more cheaply and easily and to create dissension
among free nations.

# Fostering rivalry among free-world merchants in trading with the
bloc, thus reducing the net cost to the bloc of obtaining goods it
desires from the West.

# Buying increased quantities of certain consumer goods, though
apparently just enough to help with problems within the bloc and to
rouse the interest of the West. (Of course it would not take a "trade
offensive" to obtain these consumer goods, for they have never been
restricted by the West.)

# Selling the West an exaggerated idea of the size and reliability of
markets, supplies, and general benefits that can be obtained through
East-West trade.

# Making their limited export commodities go as far as possible in
solving their import problems without draining vital resources away
from their program of forced industrialization.

# Making financial and other economic arrangements in neighboring
countries and nonindustrial areas in order (1) to gain more influence
and more access to resources there, and (2) to diminish the influence
and access to resources of free-world industrial nations.

The foregoing can be recognized, as among the things being attempted in
the Soviet "trade offensive" of 1953-54. They did not fall in separate
compartments, but were woven together in a central plan and they
contributed to one another. They were not so new as some of them might
look at first glance. The long-term objectives which they served were
not new at all.


=Their Practices Haven't Changed=

Some new tactics have been adopted, as we have seen. But even many
tactics have more of an old look than a new. Soviet-bloc business
practices still clash with Western concepts of normal, peaceful trade
relations.

Soviet-bloc representatives have access to many free-world factories,
visit docks and inspect merchandise destined for the bloc, maintain
offices in commercial centers, receive technical materials from
libraries and business firms, and pick up voluminous statistics on
free-world resources, production, exports, and imports.

The governments of Soviet-bloc countries do not reciprocate.
Although they entertain delegations of diplomats and businessmen and
occasionally allow individuals to visit certain places when it serves
their purposes, the Western business community in general is barricaded
out of their cities, factories, and countrysides, and the peoples of
the bloc firmly locked in. Disclosures of even the simplest facts and
figures about their economies is a serious crime. They do not enter
into the customary international agreements for the protection of
patents. Though they claim to have invented almost everything, much of
their industrial progress is based on piracy of Western inventions and
technology, from the tiny Moskvich automobile to the jet engine. They
have failed to settle promptly and adequately claims for confiscation
of Western properties and for lend-lease assistance. Furthermore the
terms on which they often seek to trade omit customary guarantees
of fair dealing. For example, the U.S.S.R is still trying to insert
clauses in its East-West contracts requiring that any dispute between
the Soviet Government and the free-world businessman be arbitrated by
the Chamber of Commerce of the Ministry of Foreign Trade--an organ of
the Soviet Government. And as we have already seen, they make every
effort to circumvent the export controls of other nations; they pay
citizens of those nations to violate the laws of their governments.

The best way to characterize the Soviet "trade offensive" is that the
Soviet rulers have improvised for their trade structure a new facade
of papier mache but have not reconstructed the interior. In changing
circumstances the Kremlin was seeking effective ways of accomplishing
the same traditional objectives of feeding its industrial-military
machine and weakening the free world.

In the absence of Soviet-bloc policies conducive to furnishing a
long-term steady supply of exports desired by free-world countries,
the West could hardly expect East-West trade to return to the prewar
volume, though a short-term boost would not be surprising. The combined
value of the trade in both directions between the free world and the
Soviet bloc in Europe was $2.6 billion in 1951 ... $2.4 billion in 1952
... and about $2.2 billion in 1953. By contrast, total foreign trade
within the free world in 1953 was about $148 billion.

It is not only the amount of trade that must be considered, however,
and that is why we have devoted attention in this report to what goods
were involved and what the new Soviet regime was trying to accomplish.


=The Free World Is Strong=

What are the implications of all this for the free world?

In the face of the Soviet objectives, methods, and recent trade
activities, one can recognize the inadequacy of two extreme policies
that are often urged upon Western governments. Those extremes are:

1. Complete embargo on trade with the bloc.

2. Completely unrestricted commercial relations with the bloc.

Complete embargo would be the conventional answer in military conflict.
But to urge complete embargo in the present situation is to ignore
the fact that the present trade situation offers opportunities to
the free world. The free world, with its enormous production, can
benefit from trade; the test is what goods are traded and on what
terms. The free nations are stronger economically than they have ever
been. Collectively they are far stronger than the Soviet bloc. They
possess tremendous resources. On the whole they have solid and healthy
competitive systems. Their businessmen have behind them centuries
of experience in bargaining, merchandising, and servicing. With
these factors creating for the free world a currently strong trading
position, the free-world nations should be able to take advantage of
the needs of the Soviet bloc and by hard bargaining gain benefits from
East-West trade.

Completely normal and unrestricted commercial relations with the bloc
seem to be equally unsuitable as a course of action.

If the free world should abandon the controls it has imposed in the
interest of national security, drop its guard and permit unrestricted
trade in _all_ its raw materials, industrial goods, and advanced
technology--the free world would be the loser. In view of the Communist
objectives and methods, unrestricted trade would permit the bloc to
increase its war potential--and specifically the all-important economic
base of its war potential--faster than it otherwise could. The goods
received by the free world would bring no commensurate return.

If such trade encouraged a general relaxation of the free world
military defense, it would be that much more damaging to the free
world. In any event, unrestricted trade would permit the Soviet traders
to compete freely in Western markets for important strategic goods
needed for Western military defense, thus making that defense more
costly and difficult for many free-world nations.

Employing the monopoly power of the Soviet states, individually or
collectively, the bloc would be able to extract economic advantages and
unwarranted concessions from the weaker individual traders and nations
to the net detriment of the free world.

Finally, unrestricted commercial relations, in which commercial gain
is the overriding criterion, would weaken the free world insofar as
they increased the economic reliance of certain free areas upon the
bloc. This could be harmful by increasing the vulnerability of these
areas to Soviet pressure. It could also have the effect of diverting
the attention of the free world from its compelling general economic
tasks such as developing bigger, better, and more accessible markets
and making international financial and trade arrangements that will
diminish the difficulties of sharing the free world's vast resources
and production among the nations.


=The Challenge=

Thus, the problem and the challenge is to find and to steer a course
midstream--to trade with the Soviet bloc on terms which bring to the
free world a net advantage. This is no simple matter.

There are two sharp dangers for the free-world nations.

One is the danger of being divided in purpose, split apart on policies
requiring concerted action, and forced into competing among themselves
in circumstances which call for unified action.

The other is the danger of being deceived about what is going on in
East-West trade and what's behind it. This danger grows partly out
of the complexity of economic relations and the fact that the Soviet
system and approaches to economic relations and peace in general are so
different from ours. It grows partly out of the fact that deception is
intentionally practiced by the Soviet Communists.

On the other hand, the Soviet-bloc governments have limitations in
trying to accomplish their purposes. The free world, aware of its own
strengths, can meet a great part of the challenge by working together
not only to understand the Soviet bloc's general objectives and goals,
but also to identify the specific actions which the bloc chooses at
any given time to accomplish them. In this way the free world has the
opportunity of segregating the harmful from the helpful.

We of the free world will neither be deceived nor divided if we keep
ourselves armed with facts and work as a team.



_CHAPTER V_

=U. S. Policy on Strategic Trade Controls=

The economic and trading activities of the Soviet empire require close
and continual study by free governments, but Soviet actions alone do
not determine free-world policies.

Let us be perfectly clear on this point. The theme of the early
chapters of this report has been the Soviet "trade offensive" and
its background, just as the theme of the third semiannual Battle Act
report was the enforcement of free-world strategic trade controls.
The selection of the theme, however, should not be taken to mean that
Soviet trading activities are the only factor that free-world nations
must take into account when they consider what economic defense
policies to maintain in the interest of their security.

In 1953 certain other considerations were demanding the careful
attention of the agencies of the United States Government that are
responsible for economic defense.


=The Background=

One of these considerations was the probability that the world faced
a long period of tension short of general war, though with the
ever-present risk of war. In such a period, no matter how long it might
last, it would be essential for the free nations to remain strong and
alert, to move together in whatever steps were necessary for military
or economic defense, and at the same time to keep open the paths that
might lead to a sounder basis for peace.

Another factor of historic significance was the massive upswing in the
strength of the free world. Western Europe, especially, had moved into
a far stronger position, both militarily and economically, than it had
occupied a few years earlier. This gave the West greater bargaining
power and it reduced the dangers of undue economic dependence on
Soviet-bloc trading partners.

As Western Europe grew stronger the need for economic assistance from
the United States declined. Although military aid continued in a big
way, economic aid began to taper off.

Accompanying the increase in Western economic strength was a general
shift in the free world from a "seller's market," in which goods were
scarce and sellers had a relatively easy time finding buyers, to a
"buyer's market," in which buyers generally could pick and choose. Some
of the free countries had produced themselves into surpluses of some
commodities--or had built up surplus capacity and needed additional
markets in order to keep their industries prosperous.

This change brought more and more pressure from people in free
countries to carry on increased trade with the Soviet bloc. Some groups
had been clamoring for this all along, and had helped spread the
time-worn Communist propaganda that a friendly and peace-loving "big
brother" in Moscow was ready and waiting with an unlimited paradise
of peaceful trade and that the only obstacle to its attainment was
the strategic trade controls of the West. But now large numbers of
_anti_-Communist businessmen, even though many of them were aware that
the Communist propaganda was false and that Soviet policies had always
been the prime deterrent to a large and peaceful commerce, felt that
some increase in East-West trade would be beneficial as a supplement
to their much greater trade in the free world. They recognized the
limitations of the Soviet bloc as a stable, long-term trading partner,
yet saw no reason why an expansion should not be sought.

This attitude was stimulated by the Korean truce of July 27, 1953. It
was also stimulated by the gestures that the Soviet Union began making
in the direction of livelier East-West trade.

Governments in the free world tended increasingly to the view that
some revisions in Western controls might be made without sacrifice of
security interests.


=Basic Policy Reaffirmed=

The new administration in Washington, taking account of such
considerations as those, and wishing to be sure that United States
policy was the most effective that could be devised, began a thorough
review of the economic defense policy of the United States in the
spring of 1953.

This policy review was completed around the beginning of August.
The third semiannual Battle Act report, which was published last
September 28 and which covered the first half of 1953, stated that the
conclusions of the review "will be reflected in the economic defense
actions of this Government during the months to come." In the present
report, which covers the second half of 1953, it is possible to give
more information about those conclusions.

As a result of the policy review _the basic economic defense policy
of the United States was reaffirmed_. There were, however, some
shifts of emphasis--with respect to trade with the Soviet bloc in
Europe--designed to make the basic policy more effective. We shall
discuss those shifts presently, but first let's summarize the basic
policy as it has existed throughout the 6 months covered by this report.

This basic policy of the United States on East-West trade rested on the
following principles:

       1. Mutual security can best be advanced by continued increase in
     the political, economic and military strength and cohesion of the
     free nations relative to that of the Soviet bloc.
       2. The free nations should not furnish a potential aggressor with
     goods which directly and materially aid its war industry and
     military buildup.
       3. The free world may derive a net security advantage out of some
     East-West trade.
       4. Security export controls should be applied on a selective
     basis, except in the case of military aggression, when a policy of
     complete embargo may be in order.

In accordance with those principles the United States has long been
exercising certain controls over its own trade. Here is a short
description of those controls:

=United States exports to Soviet bloc in Europe=: Not prohibited
entirely, but limited to clearly nonstrategic goods.

=United States imports from Soviet bloc in Europe=: Not prohibited,
except for certain types of furs.

=United States shipping to Soviet bloc in Europe=: Not prohibited, if
carrying properly licensed goods.

=United States exports to Communist China and North Korea=: Prohibited.

=United States imports from Communist China and North Korea=:
Prohibited. (Some licenses were issued, though not recently, for goods
needed in United States military stockpiles and in special hardship
cases.)

=United States shipping to Communist China and North Korea=: Prohibited.

As for the trade of the rest of the free world with the Soviet bloc,
the policy of the United States was set forth in the Battle Act (the
text of which is at the end of this report) and in certain executive
directives. The policy was not to prevent all East-West trade but to
cooperate with other free-world countries in a system of _selective_
and flexible controls. The aim was to prevent Soviet-bloc countries
from obtaining items that would contribute significantly to their
warmaking power, and to insure that the trade which did go on served
the real economic and security interests of the West.

Ever since the Communist aggression in Korea in 1950, the Far East has
presented a policy problem different from the problem of controlling
shipments to the bloc in Europe. The official position of the United
States Government--both before and after the 1953 policy review--was
that the current levels of controls by the United States and free world
over shipments to Communist China and North Korea should be maintained.
Later on in this chapter we shall report on what happened in the China
trade during the last half of 1953.


=The New Direction of Policy=

So much for the basic policy. Now for the shifts in emphasis that took
place in United States economic defense policy toward the Soviet bloc
in Europe during the 6 months covered by this report.

It was determined that the system of the free-world controls that
had been developed during the last 4 years substantially satisfied
the objectives of retarding the buildup of Soviet warmaking power
and strengthening the free world relative to the Soviet bloc. The
effort to extend the control lists appeared to be reaching the point
of diminishing returns. It was decided not to pursue an extension of
the lists to many other items--though items would always be added
occasionally because of changed conditions or new information.

On the other hand the Government recognized a need for simplifying
the lists and removing or downgrading items, which, in the light of
current information, were no longer deemed to be so important. The
Government believed that much could be done in the months to come, if
done carefully and with due regard for security, to adjust the controls
to a "long-haul" basis. (Developments in the first half of 1954 will be
reported in the next Battle Act report.)

In general, it was decided to concentrate on seeking more effective
control of those items which, if shipped, would make a significant
contribution to Soviet warmaking power.

The main thrust from the United States toward improvement of the
control system, it was decided, would be in the field of implementation
and enforcement of controls. Notable deficiencies existed in that
field. To overcome them the free nations would need to keep improving
their techniques, and would need closer international collaboration and
pooling of information.

The new direction also took into account, even more than ever, the
economic and political problems of free-world countries. Free-world
unity was so vital, and the economic health of free nations so
important to the defense of free institutions, that problems of our
allies deserved to be given great weight in determining the actions
of this Government in the East-West trade field. This was not a new
concept, but this Government felt that such problems needed to be
discussed among the free countries more than in the past.

In setting the new direction the Government recognized:

     (1) that maintaining commercial ties between the free world
   and the Soviet bloc--compatible with the security requirements
   of the free world--may have positive advantages during the
   present period of tension;
     (2) that there are, however, risks that trade may in some cases
   lead to undue reliance on the Soviet bloc as a trading partner;
     (3) that it is important to encourage trade within the free
   world, including the entry of commodities into the United States,
   by reducing trade barriers, especially when the effect of such
   action would be to decrease the reliance of the free world on the
   Soviet bloc.

Those were among the highlights of the new direction. As explained
before, the basic economic defense policy was not altered.


=Reviewing the Control Lists=

In the light of this basic policy, and its new direction, the
Government agencies responsible for economic defense were engaged in
certain projects during the period covered by this report.

One of the most important of these projects was the review of the
control lists. This review was a complex and time-consuming operation,
which continued into 1954.

It is easy for the public to become confused about control lists, not
only because of their necessarily secret nature, but also because there
are so many lists, serving different purposes.

The United States has had three main lists for its own exports:

The munitions list, compiled and administered by the Department of
State; the atomic energy list, compiled and administered by the
Atomic Energy Commission; and a much longer list, covering all other
controlled items, which is compiled and administered by the Department
of Commerce.

In addition there are the Battle Act lists. They relate to potential
exports from other countries to the Soviet bloc. They include those
primary strategic items which we believe the other free-world countries
should embargo in the interest of mutual security.

Then there are lists consisting of those items--at varying levels of
control--which the cooperating free-world nations have accepted as a
part of their informal coordination of controls.

All of these lists are subject to a continual process of review. But as
a part of the new direction in United States policy, this continuing
review process was broadened into an intensive reappraisal. Specialists
from several Government agencies were reevaluating all our listings in
terms of sharper and more meaningful criteria, and in the light of all
the new relevant technical and intelligence information that could be
assembled.

This review would furnish the basis for appropriate adjustments and for
United States discussions with other governments in 1954 concerning the
coverage of export controls.


=East-West Trade: Road to Peace=

It is a part of the economic defense policy of the United States never
to lose sight of the vital need to keep open all paths that might lead
to a sounder basis for peace in the world.

We not only recognize the economic benefits that free-world nations
can get from an expanding East-West trade in peaceful goods; we also
bear in mind the possibility that trade contacts can help to improve
relations among peoples.

But in hoping for and working toward that end, we are not thereby
accepting the belief that international trade inevitably and
automatically leads toward peace. Hitler's Germany expanded its foreign
trade right up to the outbreak of World War II. We must view with
skepticism the Communist propaganda line on trade and peace, for we
know what their trading objectives and methods are. East-West trade
as now constituted is carried on not with private individuals in the
Soviet bloc but with agencies of Soviet-bloc governments.

International trade in general can be a broad highway toward better
living standards and more peaceful relations. It has served humanity
well. There should be more of it. But it takes two to trade, and trade
is not necessarily a road to peace unless both parties wish to make it
so.


=Trade Within the Free World=

Toward the close of the 6-month period under review, the President's
Commission on Foreign Economic Policy (Randall Commission) was hard at
work. There was a great amount of public discussion, continuing into
1954, concerning ways in which the United States and other free-world
countries could eliminate or reduce the obstacles that hinder the
international exchange of goods.

The Commission, issuing its report in January, had much to say on the
reduction of trade obstacles.

The Commission also included a section on East-West trade, recommending
that the United States not object to more trade in peaceful goods
between Western Europe and the European bloc.

These two subjects, trade liberalization and East-West trade, are
connected with each other. When businessmen in free-world countries are
hindered--either by trade barriers or other artificial causes--from
selling products in other free-world countries, they are more prone to
seek markets in the Soviet bloc.

To a certain extent this aggravates the problem of maintaining adequate
strategic trade controls and the problem that some free-world countries
have of avoiding undue dependence on the Soviet bloc.

It would be impractical to seek the elimination of all trade
restrictions within the free world but it is important to reduce
unjustifiable barriers and it is also important to take whatever other
steps are possible to develop new markets and new sources of supply.

To bring alternative markets and supplies into being is not an
overnight task but it must be done. It means the reduction of many
restrictions in the United States, thus allowing more goods to come
in from our friends and allies. It means a similar loosening of
restrictions by other free nations. It means more and better economic
integration among the European countries. It means steady advancement
in the economic development of the underdeveloped areas of the world.

All those things are important for many reasons. East-West trade is
one aspect of the matter. The United States Government recognizes that
hindrances to the exchange of goods within the free world do have a
definite relationship to the international system of strategic trade
controls.


=The China Trade Falls Off=

This report so far has concerned itself almost entirely with trade
between the free world and the Soviet bloc in Europe. Now it is time to
shift our attention to the China trade.

During the 6 months under review, free-world trade with Communist
China fell far below the first half of the year. Free-world exports to
Communist China from July through December are estimated to have been
$111.1 million, as compared with $158.9 million in the first half of
1953. This meant that shipments in the report-period fell below even
the extremely low level of the first half of 1952.

The result of this decline in shipments to Communist China was that
the estimated total for all of 1953 was $270 million, only a slight
rise in value from the 1952 exports of $256.5 million.[1] A larger rise
had been foreseen. The last Battle Act report to Congress, _World-Wide
Enforcement of Strategic Trade Controls_, pointed out: "If free-world
exports continued at the same rate as that of the first 3 or 4 months
of the year--and that is not at all certain--the 1953 total would be
around $375 million." It actually seems to have been about $100 million
short of that.

Free-world imports from Communist China also dropped in the second half
of 1953, though not so sharply as exports. They amounted to $198.4
million in the second half, according to a preliminary estimate,
compared with $226.6 million in the first half of the year. This
brought the estimated annual total of imports to $425 million in 1953,
as compared with $365.8 million in 1952.

It was true that in spite of the decline in the latter part of the
year, some countries were able to sell more goods to the Chinese
Communists in 1953 than they had in 1952. For example, exports of
Western Germany rose from $2.8 million in 1952 to $25 million in 1953,
in line with the general rebirth of German foreign trade. Exports of
France rose from $3.3 million to $12.4 million, and Japan from half a
million dollars to $4.5 million. Exports from the United Kingdom rose
from $12.8 million to $17.5 million. On the other hand exports from
the British Colony of Hong Kong, the traditional gateway of commerce
to and from the mainland of China, fell so drastically in the second
half of 1953 that the Hong Kong total for _all_ of 1953 was only $94.6
million, or little more than the $91 million of the previous year. And
the Communists slashed their buying of Pakistan cotton, which had come
to about $84 million in 1952, down to about $7 million in 1953.


[1] These 1952 and 1953 figures are adjusted to exclude Swiss watches,
which appear in Swiss official statistics as exports to China, but
which actually went to the British Crown Colony of Hong Kong and were
reexported to other free-world countries. Switzerland, in reporting
its "China" trade, lumps together its trade with Communist China,
Nationalist China, and Hong Kong. The watches in question are believed
to amount to approximately $1 million a month, on the average.


=They Play by Their Own Rules=

Clearly the glittering prospect of a vast and lucrative trade with the
Chinese Communists which had captured the imagination of many Western
traders was not materializing.

The China Association, a British trade organization, said in December:
"There is no doubt but that the potentialities have been greatly
exaggerated in the public mind, partly as a result of the superficial
successes of the various unofficial trade missions which have paid
visits to Peking this year. This overeagerness has unfortunately been
reflected in an increasing severity of the terms which China now
demands."

Information about the increasing severity of the trade requirements
which Communist China was trying to impose upon the free world came
from all sides in the last half of 1953. Those terms would hardly
suggest a genuine interest in normal and expanding trade relations.

When the Chinese Communists sell, they demand a confirmed letter of
credit in the hands of their own bank before they will ship the goods.
They collect payment as soon as they have loaded the goods on a ship.
They present a Communist Chinese Government certificate of inspection
against which the buyer has no recourse if he finds--weeks or months
later--that the quality of the goods is below specification.

One who sells to Communist China is asked to follow a very different
set of rules. He ships his goods and waits until they have arrived in
Communist China, have been inspected by Communist Chinese Government
inspectors, and are in the hands of the buyers, before he can collect
his money. In the meantime he extends credit without interest,
immobilizing the capital he had invested in the cargo, freight, and
insurance, and is forced to accept claims resulting from inspection of
his goods in Communist China.

No doubt exceptions to these rules are still being granted to some
Western traders, for the rules are so remote from long-recognized
international trading practices that many firms would naturally balk
at them. But there is no doubt that the unconventional and frustrating
practices of the Chinese Communists have interfered seriously with
the amount of commerce and have disillusioned many who saw an almost
unlimited market in China's multitudes.


=United States Policy on the China Trade=

As mentioned before, the policy of the United States throughout
the 6 months under review was to continue its total embargo on all
exports--strategic or nonstrategic--to Communist China and North Korea,
which were aggressors, and labeled as such by the United Nations.
Rumors heard from time to time in various countries, to the effect
that the United States had decided to relax its embargo or was under
irresistible pressure to do so, and that American cars were reaching
the Chinese mainland by way of Japan, were completely untrue.

The position of the United States throughout the review period was
also that the free-world embargo on strategic goods to Communist
China--an embargo much more sweeping than that applying to the European
bloc--should be maintained. Other free governments took the same
position, and the embargo continued in force. Such relaxations as took
place in controls were changes that did not affect the multilateral
embargo. One example was the change in the control of antibiotics
and sulfonamides. The nations which carry on trade with Communist
China had been controlling those drugs, while hostilities continued
in Korea, by limiting the quantities shipped; the quotas assumed by
the various nations were scheduled to expire on December 31, 1953,
and were permitted to expire on schedule. Another example was the
relaxation by Japan on certain items that had been under embargo by
that country--but these were items that the other countries were not
embargoing. The same was true of the United Kingdom's decision to
permit the shipment of light passenger automobiles.

Though the policies of other major free governments regarding trade
with Communist China have not been identical with our own, the United
States has not attempted--and will not attempt--to bring about
conformity through coercion.

This is true of all of our relations with other countries, not merely
our relations with them on the issue of Communist China.

Leaders of this Government forcefully reaffirmed that principle during
the period we are reviewing.

Secretary of State John Foster Dulles said in a statement on December 1:

     "The tide of events has made our Nation more powerful but I
     believe that it should not make us less loyal to our great
     American traditions; and that it should not blur our dedication to
     the truths, expressed in our Declaration of Independence, that we
     owe a respect to the opinions of others.

     "Today it is to our interest to assist certain countries. But that
     does not give us the right to try to take them over, to dictate
     their trade policies and to make them our satellites.

     "Indeed, we do not want weak or subservient allies. Our friends
     and allies are dependable just because they are unwilling to be
     anyone's satellites. They will freely sacrifice much in a common
     effort. But they will no more be subservient to the United States
     than they will be subservient to Soviet Russia.

     "Let us be thankful that they are that way, and that there still
     survives so much rugged determination to be free."

On December 2, President Eisenhower endorsed the declaration of the
Secretary of State and said this:

     "The easiest thing to do with great power is to abuse it--to
     use it to excess. This most powerful of the free nations must
     not permit itself to grow weary of the processes of negotiation
     and adjustment that are fundamental to freedom. If it should
     turn impatiently to coercion of other free nations, our brand of
     coercion, so far as our friends are concerned, would be a mark of
     the imperialist rather than of the leader.

     "What America is doing abroad in the way of military and economic
     assistance is as much a part of our own security program as
     our military efforts at home. We hope to be able to maintain
     these overseas elements of our security program as long as our
     enlightened self-interest requires, even though we may, and
     probably we always will, have various differences of opinion with
     the nations receiving our aid."

On that same day, Admiral Arthur Radford, Chairman of the Joint Chiefs
of Staff, speaking in general of America's leadership role in the
world, said in a speech at West Point:

     "Relationships between members of coalitions are never simple,
     particularly in coalitions as large as ours of the free world.
     The smaller nations expect, and are entitled, to exercise their
     sovereignty and independence. Our leadership therefore involves
     self-restraint if our objectives are to be achieved by consent,
     rather than through the pressure techniques imposed by the Soviet
     on her satellites."

There is one commodity that is not on any list but is more important
than all others, and that is the cement that binds the free world
together.



_CHAPTER VI_

=The Battle Act and Economic Defense=


The Mutual Defense Assistance Control Act of 1951, usually known as
the Battle Act after Representative Battle of Alabama, established a
general framework of policy within which the executive branch takes
actions that meet current conditions.

This law reinforced the system of international strategic trade
controls that was in existence prior to its enactment. It maintains
a close link between United States foreign aid and strategic trade
controls. It also recognizes the necessity of international cooperation
in the control effort, and it aims toward strengthening the free world
as well as impeding the military ability of nations threatening our
security.


=Battle Act Functions=

Administering the Battle Act is one of the responsibilities of the
Director of the Foreign Operations Administration, with the help of
a Deputy Director for Mutual Defense Assistance Control (MDAC). The
Director's responsibilities under the Act include the following:

       1. Determining which commodities should be embargoed in
     order to effectuate the purposes of the Act.
       2. Continually adjusting the embargo lists to current conditions.
       3. Advising the President on whether or not United States
     aid should be continued to a country that has knowingly permitted
     the shipment of embargo-list items to the Soviet bloc.
       4. Making a continuing study of the administration of export
     control measures undertaken by foreign governments and reporting
     to Congress at least every 6 months.
       5. Making available technical advice and assistance on export
     control procedures to any nation desiring such cooperation.
       6. Coordinating United States Government activities which
     are concerned with security controls over exports from other
     countries.


=The Money and the Manpower=

The budget of Mutual Defense Assistance Control (MDAC) for the present
fiscal year is $1,078,000. As of December 31, 1953, the MDAC staff
consisted of 29 persons, including clerical employees. In addition,
there were 111 persons on other United States Government agency
staffs, both in Washington and overseas, who were performing Battle
Act functions and were paid out of MDAC funds. These 111 were in the
following agencies:

   Commerce Department             32
   State Department                43
   Defense Department              13
   FOA (other than MDAC)           23
                                 ----
       Total                      111

This brought the total personnel on the MDAC payroll to 140, as
compared with 115 on June 30, 1953.

Besides these 140 people, the four agencies listed above had still
others, paid from the agencies' own funds, who were working at least
part of their time on similar functions (and generally were engaged in
such activities even before the Battle Act became law).


[Illustration: EDAC STRUCTURE]


=Meshing the Gears=

The Battle Act is a part of the economic defense program of the
Government. The economic defense program involves at least 10 agencies
whose activities and interests have to be coordinated. The coordination
is accomplished through the Economic Defense Advisory Committee (EDAC).
The chairman of EDAC is the FOA Deputy Director for MDAC. The chart
opposite this page shows what agencies are members and how the EDAC
structure is set up. In addition the United States Information Agency
has an observer on EDAC, and economic defense matters are closely
coordinated with USIA for overseas information purposes.

The chart also shows that EDAC has an Executive Committee; it
handles the day-to-day operating and policy problems of the economic
defense program. EDAC advises the Director of the Foreign Operations
Administration and the Secretary of State who are charged with
coordinating the implementation of the program of economic defense
matters including the control of strategic shipments from the free
world to the Soviet bloc.

Each agency that has a part in the economic defense program brings its
own particular point of view to the discussions which constantly go
on in the EDAC structure. For example, the Department of State is the
agency that coordinates the overall foreign policy of the Government
and deals directly with other countries; hence, that Department is
able to speak authoritatively about the vital problems involved in
maintaining good relations and close cooperation among the free
nations, and concerning the most feasible and effective means of
exerting United States influence in the implementation of United
States policies. The Department of Defense, being the agency primarily
concerned with military defense, brings to the discussions its own
expert knowledge of military matters and contributes valuable advice
on the military aspects of the problems that come up. The Department
of Commerce brings its specialized knowledge of commodities and its
experience in the administration of controls over the exportation of
goods from the United States. The Foreign Operations Administration,
besides administering the Battle Act, brings the point of view of
the program of foreign assistance and the economic factors which
must be taken into account. The Treasury Department is the authority
on foreign-assets control, the Atomic Energy Commission on the
significance and control of all atomic-energy materials, and so on
through the list.

All these viewpoints and all these special areas of expert knowledge
and experience are necessary to a well-rounded economic defense
program. Each agency, while discharging its obligation to make its
own special contribution to policy, is perfectly well aware that it
is only one of the participants, and that the other agencies have
legitimate points of view and valuable contributions to make. It
is natural and inevitable that these agencies should not approach
every problem of economic defense with identical views. But when the
problem has been thoroughly considered, and all viewpoints taken into
account, a decision is made on the basis of the overriding security
interest of the country, and that decision then becomes the policy of
the Government as a whole, respected by each agency regardless of the
specialized views which it might have expressed in the discussions.


=Improving the Machinery=

Organizational changes made in the United States economic defense
program during the 6 months under review included the following:

1. _Establishment of a Security Trade Controls unit within the
United States Regional Organization at Paris._ This unit represents
the United States in the informal international committee known as
the Consultative Group (CG) and its subordinate working bodies, the
Coordinating Committee (COCOM) and the China Committee (CHINCOM).[2] It
also performs certain Battle Act duties in Europe. These two functions
had previously been handled by separate staffs. The head of the new
amalgamated office is responsible jointly to the Department of State
and the Director of the Foreign Operations Administration.

2. _Establishment of a Joint Operating Committee (JOC) in Washington._
This development grew out of the fact that while EDAC is advisory
on Battle Act matters and on economic defense in general, another
interagency structure known as the Advisory Committee on Export Policy
(ACEP) advises the Secretary of Commerce on controls on exports from
the United States. EDAC and ACEP rely on basically similar information
and upon the same general body of experts throughout the Government.
Accordingly, JOC was created to analyze and recommend the strategic
rating of commodities and the levels of control which might be
exercised by the United States and advocated by the United States in
international discussions. JOC is thus the central point of United
States commodity review activities in this field, and there are no
overlapping or competing activities of this nature. The chairman of JOC
is a Commerce Department representative who is also a regular member of
the EDAC Executive Committee. The membership of JOC is made up of the
principal agencies which sit on both ACEP and EDAC. The new arrangement
has proved itself in practice.


[2] See Third Semiannual Battle Act Report, ch. II.

=The Termination-of-Aid Provision=

The Battle Act forbids United States military, economic, and financial
assistance to any country that knowingly permits the shipment to the
Soviet bloc of items listed for embargo under the Act, except that if
the items are not munitions nor atomic energy materials the President
may direct the continuance of aid "when unusual circumstances indicate
that the cessation of aid would clearly be detrimental to the security
of the United States."

On August 1, 1953, the President notified the Congress that he had
directed the continuance of aid to France, the Federal Republic of
Germany, Norway, and the United Kingdom, because the cessation of aid
would have clearly been detrimental to United States security. Even
though this presidential action took place in the second half of 1953
it was covered in the last Battle Act report, entitled _World-Wide
Enforcement of Strategic Trade Controls_, and the texts of the letters
that went to the Congress were reprinted as appendix B of that
document, pages 73-77.

There were no further Battle Act determinations to continue aid
during the 6 months covered by the present report. (Another group of
determinations went to the Congress on March 5, 1954, and the texts of
those letters will be reprinted in the next Battle Act report.)

During 1952 and 1953, the first 2 years in which the Battle Act was
in force, the total amount of shipments of Battle Act embargo items
knowingly permitted by countries receiving United States aid was in
the neighborhood of $15 million. Of this amount, 74 percent consisted
of "prior commitments"--that is, commitments made before the Battle
Act embargo lists went into effect on January 24, 1952. None of the
shipments were arms, ammunition, implements of war, or atomic energy
materials. Only $98 of the total went to Communist China, all the rest
to the European bloc. The $15 million may be compared with a total of
$2.7 _billion_ of exports of all descriptions from the entire free
world to the Soviet bloc during the same 2 years.


=Miscellaneous Activities=

As usual, a wide range of activities relating to the Battle Act and
economic defense was carried on during the last half of 1953.

The intensive United States review of the control lists has been
mentioned in chapter V.

The United States Government continued to increase its emphasis
on seeking improvements in the free-world systems for preventing
illegal diversions of strategic goods. This problem involves goods
of free-world origin which start out to friendly destinations but
are illegally diverted en route to destinations behind the Iron
Curtain. Our Government: (1) set up improved machinery in Washington
for collection and coordination of information, in order to increase
the effectiveness of our participation with other countries
in the enforcement program, and (2) sought to work out better
intergovernmental machinery to deal with diversions.

Our Government also intensified its efforts to analyze current trade
patterns between East and West, including the large number of trade
agreements concluded between free-world nations and Soviet bloc nations.

       *       *       *       *       *

=Summary of the Report=

This leads us back to the earlier chapters of this report, which may be
summarized as follows:

In chapter I, Stalin's Lopsided Economy, we looked at the basic
economic structure of the Soviet Union. Beginning in the 1920's, the
Bolsheviks deliberately concentrated on an industrial-military buildup,
at great cost to their peoples. After the war, the same pattern was
forced upon the European satellite countries. Trade was reoriented away
from the West. That did not mean that the bloc could do without Western
goods, but the goal was to obtain those imports that would help the
bloc become more powerful and less dependent on the free world. The
Kremlin also sought to use trade to divide the Western powers and to
increase the reliance of free-world nations on the bloc. These Soviet
policies--not Western strategic controls--were the main causes of the
low level of East-West trade as compared with prewar. Stalin, shortly
before his death, made it clear that he welcomed the establishment of a
divided trade world--he saw it as a boon to communism and a blow to the
non-Communist nations.

In chapter II, The New Regime and the Consumer, we described the
new economic courses announced by the Soviet bloc governments after
Stalin's death. They made a great fanfare about providing more consumer
goods to the people and improving the neglected agricultural sectors.
But their steps did not go very far, and the purpose was to benefit
the state and not the people. They apparently were trying to ease
internal pressures--especially in the satellites--by opening the
valves a little, as they had done before. But they did not alter the
basic war orientation of their economies and they pressed on with the
industrial-military buildup.

In chapter III, The Kremlin's Recent Trading Activities, we reviewed
the so-called trade offensive--the various Soviet activities of 1953
and the early part of 1954 which seemed to show a livelier interest
in East-West trade. The U.S.S.R. concluded more trade agreements,
ordered consumer goods at a somewhat brisker rate, but also expanded
its efforts to buy ships and showed plainly that its principal
interest was still centered on the kind of materials that would foster
industrial expansion. To help pay for imports, the Communist planners
put manganese, oil and gold on the market in larger quantities than in
recent years, though history showed that they had done the same thing
in the past when it served their purposes. They also tried to increase
their influence in Latin America and Asia.

In chapter IV, What's Behind It All, we examined the motives and the
goals of the Soviet planners in all these recent trading activities.
Oversimplified explanations should be avoided. Their actions are not
motivated by a pursuit of peace--at least not peace as the West knows
the term. Their motives are mixed. In changing circumstances they are
seeking effective ways of accomplishing the same traditional objectives
of feeding the economy--especially the heavy industrial base--and of
weakening the free world. The free world is strong, and if free nations
refuse to be divided or deceived--if they work shoulder to shoulder to
prevent the Soviet bloc from getting the advantage--they can trade with
the Soviet bloc on terms that bring benefits to the free world.

In chapter V, U.S. Policy on Strategic Trade Controls, we outlined
the factors involved in setting policy. Not merely because of Soviet
activities but also because of the vast upsurge of free-world
production and other considerations, 1953 brought a thorough review of
United States policy. The basic policy was reaffirmed, but shifts in
emphasis were made to meet current conditions and establish controls
on a long-haul basis. Policy on the China trade did not change at all
during the 6 months under review. Free-world trade with Communist China
dropped sharply in that period, partly because of unequal trading terms
that the Chinese Communists were trying to impose upon free-world
traders. Finally, the United States reaffirmed its traditional policy
of treating its friends and allies with respect. In the words of
President Eisenhower, "this most powerful of the free nations must
not permit itself to grow weary of the processes of negotiation and
adjustment that are fundamental to freedom."



_APPENDIX A_

=Trade Controls of Free World Countries=


This appendix summarizes, in accordance with section 302 (b) of the
Battle Act, the trade control measures of most of the important
mercantile countries of the free world, as well as of several others
for which there is new information to report. These descriptions
supplement the main text of this report and similar appendices
contained in previous Battle Act reports.

The main features of the trade-control systems of most free-world
countries were originally established to deal with such problems as
foreign-exchange control, conservation of goods in short supply,
and directing foreign trade to particular currency areas. For most
countries security trade controls have been inlaid in these general
economic controls and are exercised through them, using the same
basic techniques of export licensing and customs inspection as in
export control for other purposes. Thus they are closely connected
administratively with them.

The details of security trade controls of almost all countries have
a security classification. Thus these descriptions must, in a public
report, be presented in somewhat general terms.

To avoid duplication, this appendix does not include countries which
were included in the appendix of previous Battle Act reports and
for which there is no substantial new information on security trade
controls which can be reported publicly. Summaries of export controls
employed by Thailand and Yugoslavia are given on pages 64 and 69,
respectively, of the third Battle Act report. The second Battle Act
report contains summaries pertaining to Bolivia, Colombia, Ecuador,
Panama and Peru on pages 64-66, and to Indo-China, The Philippines and
Lebanon on pages 66, 68 and 71, respectively. Summaries concerning
Argentina, Brazil, Chile, Mexico and Venezuela are contained in pages
62-66 of the first Battle Act report, as well as Austria (p. 66),
Iceland (p. 70), Afghanistan (p. 75), Burma (p. 76), China (Formosa)
(p. 76), Federation of Malaya (p. 81), Iraq (p. 87), colonial
Africa (pp. 91-97). All of the summaries mentioned above are still
substantially up to date.

Covered in this appendix, in alphabetical order, are the following:

            _Country_                          _Page_
Belgium-Luxembourg                                 66
Canada                                             67
Denmark                                            67
Egypt                                              68
France                                             69
Germany (Federal Republic) and Western Berlin      70
Greece                                             71
Hong Kong                                          72
Iran                                               72
Israel                                             74
Italy                                              74
Japan                                              76
The Republic of Korea                              77
The Netherlands                                    77
Norway                                             78
Pakistan                                           79
Portugal                                           79
Singapore                                          80
Turkey                                             80
United Kingdom                                     81
United States of America                           83


BELGIUM-LUXEMBOURG

License Requirements

The basic legislation from which the present import-export control
system in Belgium has developed was a law of June 30, 1931, modified
by the law of July 30, 1934, which authorized in broad general terms
the regulation of Belgium's foreign commerce to promote the general
economic well-being of the country. The convention with the Grand
Duchy of Luxembourg on the 23d of May 1935, amending the economic
union convention of 1922, established also a combined Belgo-Luxembourg
Administrative Commission (the Commission Administrative Mixte
Belgo-Luxembourgeoise) and in this way provided a central agency for
coordinating the import and export licensing procedures of Belgium
and Luxembourg. Pursuant to the 1935 convention, when the appropriate
agency of either Government desires to modify or expand regulations
pertaining to import and export controls, the recommendation is
discussed with the appropriate agencies of the other Government; their
agreement having been reached the new policies are communicated to the
Mixed Commission which then transmits identical instructions to the
Belgian Central Office of Licenses and Quotas and the Luxembourg Office
of Licenses. This procedure insures close coordination of the import
and export licensing operations of the two Governments in order that
the general economic welfare of both may best be served.

The control over exports effected by the requirement of export
licenses is reinforced by special controls applied at the time of
the actual export of the licensed merchandise. Submission to these
special controls is required as a previous condition to the obtaining
of certain licenses, these special additional controls being applied
by reason of the special nature of the merchandise to be exported
or to assure the direct delivery of the merchandise to its foreign
destination.

Applicants for export licenses must make a declaration that they
are familiar with the conditions upon which licenses are issued and
the regulations relative to exchange controls, and that they accept
these conditions and regulations without reserve. The applicant also
acknowledges that the licenses are not transferable and that any
irregularity in his application or utilization of the license subjects
him to possible refusals of any new export license applications and may
expose him to prosecution for a criminal offense. Exporters of products
whose final destination is controlled must sign an undertaking that
their exports are not to be reexported. In such cases, the exporter
renounces his right to obtain any subsequent export licenses in all
cases for which nonreexport declarations are required, if the present
undertaking is evaded.

At the present time, licenses are not required for goods passing in
transit through Belgium, with the exception of arms and implements of
war and atomic energy items, as well as petroleum and its subproducts.

Financial Controls

Prior authorization is required for all buying and selling transactions
abroad by Belgian and Luxembourg residents. The exchange control is
carried out by the Belgo-Luxembourg Exchange Institute.

Shipping Controls

Belgium has taken action to prevent the carrying of strategic goods in
Belgian ships to Communist Chinese and North Korean destinations.


CANADA

Permit Requirements

The Canadian approach to export control is in two parts: by strategic
and short supply commodities, and by areas. Under the commodity control
two schedules of goods have been established: (1) goods in short supply
for which permits are required for shipment to all destinations; and
(2) goods of strategic importance for which permits are required for
shipments to all countries other than the United States. The area
control sets up a list of countries (roughly all of Europe and the
Far East) to which all shipments normally require a permit. A general
export permit is in effect which enables the shipment of specified
nonstrategic items to all destinations except to Communist countries
without individual permit.

Export controls are administered by the Export Permit Section of the
Canadian Department of Trade and Commerce under authority of The Export
and Import Permits Act.

Transit Controls

An export permit is required for all goods originating outside Canada
when tendered for export in the same condition as when imported,
without further processing or manufacture in Canada. Goods in transit
in bond on a through journey on a billing originating outside of
Canada, clearly indicating the ultimate destination of the goods to
be a third country, do not require a Canadian export permit. Foreign
goods passing through Canada to a third country without a through bill
of lading require a Canadian export permit. (If such goods represent
United States shipments of controlled goods passing through Canada to
third countries they must be covered by a United States export permit.)
All Canadian goods having an undeclared ultimate destination require
export permits. Effective from July 4, 1952, shipments of United States
goods through Canada must be accompanied by a copy of the United States
export declaration form.

Financial Controls

Canada does not exercise financial controls over the movement of any
commodity.


DENMARK

License Requirements

Export licenses are required for all commodities, except certain
agricultural products, if the goods are exported to or intended for end
use in countries which are not members of the European Payments Union
or are within the dollar area.

For the goods enumerated in the below-mentioned Commodity Lists A
and B, export licenses are required, irrespective of the country of
destination.

List A of the Danish export regulations consists of items of strategic
significance. For most of these items the licensing authority is the
Board of Supply, but the Ministry of Justice controls exports of arms,
munitions, and military equipment, and machinery for the production
thereof. For the exportation of ships, the Board of Supply must obtain
prior approval from the Ministry of Commerce, Industry, and Navigation.

List B consists of nonstrategic goods. Export licenses for these are
issued by the Board of Supply, the Board of Health, the Ministry of
Public Works or the National Bank of Denmark according to the nature of
the commodity concerned.

Denmark has instituted import certificate-delivery verification
procedures.

Exchange Controls

The National Bank of Denmark exercises strict controls over all
transactions in foreign exchange. Earnings in foreign currencies must
be repatriated and sold to the bank unless special exceptions are made.

Transit Controls

The export controls apply to merchandise exported from the Copenhagen
free port, including exports from transit or bonded warehouses and
goods from free port or private warehouses. They also apply to goods in
transit through Denmark, unless these are transiting on a through bill
of lading and there is no change in the ultimate destination. They thus
effectively prevent unauthorized diversion of goods in transit through
Denmark.

All transit transactions financed by Denmark are subject to control by
the national bank, regardless of whether the goods in question actually
pass through Denmark or are forwarded directly between the countries
of origin and destination. In its administration of these provisions
the bank observes the same rules as the export control authorities with
which the bank cooperates closely in this field.

Shipping Controls

An arrangement has been made by the Danish Government with Danish
shipping companies to prevent the carrying in Danish vessels of
strategic goods to Communist China and North Korea. This arrangement
is implemented through a licensing system operated under a voluntary
agreement with Danish shipowners.


EGYPT

License Requirements

Foreign trade and foreign exchange in Egypt are under official control.
These controls were primarily designed to conserve foreign exchange but
since the spring of 1951 they have been expanded to prevent the export
of short supply items.

Except for books, magazines and newspapers, import licenses are
required for all imports. Prior to October 6, 1952, licenses were
required for goods originating in hard-currency countries, while
imports from other sources were in the most part exempt from
restrictions.

Application for imports are submitted to the Controller General of
Imports, Ministry of Finance. Exports are subject to export regulations
which are divided into three main categories: (a) goods that may not be
exported; (b) goods that can be exported freely, through the Customs,
without the need of an export license, and (c) goods that should be
covered by a license. The Import and Export Committee is the main
authority entrusted with the formulation of decisions governing exports
and imports. This Committee is under the Secretaries for Finance,
Commerce and Industry, Supplies, Agriculture, War, the Director General
of Exchange Control, the Director General of Cotton Affairs of the
Ministry of Finance, the Controllers General of Exports and Imports,
and the Director General of Customs.

Transit Controls

There are no special licensing requirements or controls on goods in
transit other than the ordinary customs supervision.

Financial Controls

Foreign exchange is under official control. The basic regulation
requires all foreign exchange earnings to be repatriated to Egypt
within 6 months after the shipping date of the goods. The law requires
that all dollar holdings or payments received by Egyptian nationals or
foreigners residing in Egypt be reported to the Egyptian Government and
converted into Egyptian currency at the official rate unless they are
the proceeds of cotton yarn and cloth or raw cotton exports in which
cases 100 percent or 75 percent, respectively, of the dollars may be
retained for up to 210 days in an "import entitlement" account usable
to buy certain listed essential and semiessential commodities.


FRANCE

License Requirements

Export licenses are required for over one-half the commodities
identified in the French tariff nomenclature. Governmental authority of
this control is contained in various decrees, the latest dated November
30, 1944. These decrees also permit addition to or removal from the
list of controlled commodities merely by publication of a notice in
the _Journal Officiel_. The most recent list of these commodities,
published as a codification of all previous lists, appeared in _Journal
Officiel_ No. 156 of July 5, 1953.

Applications for license to export, as submitted by French exporters,
are examined by the Ministry of Industry and Energy, by the Office des
Changes (where monetary and financial factors are given consideration),
and on occasion by appropriate technical committees and personnel in
other agencies. At the time the application for export license is
submitted, the exporter may be instructed by the Ministry of Industry
and Energy to submit a sample, photograph, blueprint, drawing, or
other detailed description of the commodity in question. These data
are used in determining the advisability of issuing the export
license requested. At the port of exit, random samples of actual
exports are extracted by customs officials and these are compared
by competent technicians with the original data submitted with the
license application. This procedure is designed to assure in as many
instances as practical that the commodity exported is identical with
the commodity for which the export license is issued.

In the event fraudulent action on the part of the exporter is found and
can be legally established, the exporter is subject to confiscation of
the goods in question and fines ranging upward to four times the value
of the shipment plus penal servitude. The control system in operation
in France makes it possible to block or encourage exports to any
destination of commodities requiring export licenses.

Financial Controls

All transactions in foreign exchange engaged in by French residents,
particularly those in which a French resident takes title to foreign
merchandise, require the prior authorization of the French Government.

An "exchange commitment" (guaranteeing the return to the Government of
the exchange proceeds of a transaction) is required for all exports
and reexports of merchandise to which a French resident holds title.
Where the products concerned are subject to export license, the export
license suffices for the exchange commitment.

Shipping Controls

In order to avoid the transport on French vessels of strategic
commodities to Communist China, the French Government has reached
agreement with the only French shipping firm operating on the China run
that the latter will not transport commodities of any description to
Communist China unless these are covered by export license or permit
indicating Communist China as the destination and issued by the French
Government or a friendly foreign government maintaining the same level
of controls as concerns strategic items to China as is maintained in
France.

The French Government has also instituted controls to deny bunkering
facilities to vessels transporting strategic commodities to Communist
China.


GERMANY (FEDERAL REPUBLIC) AND WESTERN BERLIN

License Requirements

No commodity can be exported from the Federal Republic of Germany or
Western Berlin unless it is covered by an export-control document,
which is issued by the interior customs authorities. However, certain
types of exports require a special export-control document which is
granted by the interior customs authorities only after a certificate
of approval has been obtained, as appropriate from the Central Export
Control Office of the Federal Government or the Central Licensing
Agency of the Berlin Senate. A certificate of approval is required for
all exports (regardless of commodity) to the Soviet bloc, Hong Kong
or Macao, and for the export of all commodities in excess of DM 500
on the "restricted list," published by the Federal Government, to all
other countries. This list, which corresponds to the United States
"positive list," comprises commodities under control for security and
short-supply reasons and includes all items covered by title I and
title II of the Battle Act.

Exports to numerous western countries, including peripheral countries,
are subject to one form or another of end-use checks. The import
certificate-delivery verification procedures have been in operation
since July 1951.

In conjunction with the issuance of either the export-control
document or the special export-control document, the interior customs
authorities observe a definite procedure for physical inspection of
commodities being exported. Additional control over commodities being
exported from the Federal Republic is exercised by the border customs
authorities.

Transit Controls

Certain items are prohibited for intransit shipments on grounds of
health and sanitation, but the number of items so prohibited is very
small and the prohibited list has not been changed since 1939. German
customs officials may inspect transit shipments at the border and
remove any items prohibited under German law. They then seal the
containers of all other goods and such goods are permitted to proceed,
in accordance with international agreement on transit traffic, without
further inspection or restriction, except to insure at the exit border
that the original customs seals remained unbroken.

Intransit shipments arriving in the Freeport of Hamburg are subject
to a customs documentary and physical check before being allowed to
enter the Freeport. When in the Freeport, such shipments are under
the control of the Freeport authorities, and may be loaded, unloaded,
or reloaded only with their approval. The destination of intransit
shipments arriving in the Freeport of Hamburg traveling under a
"through bill of lading" can only be changed upon instructions of the
original shipper, while the destination of intransit goods traveling
under an "ordinary bill of lading" can be determined by the responsible
local forwarding agent.

Intransit shipments consigned to West German firms and remaining
in the Freeport of Hamburg for shipment to a consignee outside
Western Germany, require an intransit trade permit (Transit
Handelsgenehmigung), except when the goods are returned to country of
origin. Such intransit trade permits are issued by the State Central
Banks after careful scrutiny of the West German firm and in accordance
with the same regulations applying to shipments of West German origin,
and approval by the West German Central Export Control Office. West
German firms must be listed in the official trade register in order to
qualify for an intransit trade permit.

The identical procedure is enforced in the Freeports of Bremen and
Bremerhaven, with the exception that the functions within the Freeport
are carried out by Federal Customs Authorities rather than Freeport
Authorities. This procedure also applies to Cuxhaven, Emden, and Kiel,
which are Freeports of very minor importance.


Financial Control

All financial transactions between residents of Western Germany and
Western Berlin and residents of other areas are subject to either
general or specific exchange-control authorizations issued by the
foreign-trade banks. Before those permits are granted, the transactions
in question are not only screened with respect to currency problems
but also in regard to the strategic nature of the goods. The latter
screening is done by export control officials, who have the power to
prevent the transaction.


GREECE


License Requirements

Export licenses are required for all strategic commodities, all
minerals, and for certain nonstrategic commodities for which export
quotas have been established. For nonstrategic shipments, licenses are
issued by the Bank of Greece in accordance with directives from the
Greek Foreign Trade Administration, Ministry of Commerce. For strategic
shipments, including those to the Soviet bloc countries, licenses must
be obtained from the FTA. Such FTA licenses are limited to items and
quantities contemplated by trade agreements or approved private barter
arrangements.


Transit Shipments

A transit shipment whose final destination is not indicated on the
manifest or shipping documents must be licensed by the FTA prior to
being reexported. If the destination be indicated, no export license is
required.


Financial Controls

Foreign exchange proceeds must be surrendered to the Bank of Greece.


Shipping Controls

Effective March 17, 1953, the Greek Government prohibited Greek flag
vessels from calling at Communist ports in China and North Korea. This
was accomplished by the Greek Council of Ministers Act No. 204 of
March 17, which was enacted into law by the Greek Parliament on May 7.
Violators are punishable under the provisions of law No. 2317 of 1953,
published in Greek Government Gazette No. 61, dated March 17.

The Greek foreign investment law provides that foreign vessels
transferred to the Greek flag may only be resold to countries named in
the "letter of approval". This listing has not included Soviet bloc
countries. With only minor exceptions, ships already under the Greek
flag may not be resold to other countries.

Current bunkering controls require licensing both by the Bank of Greece
and the customs authorities. Ship repair controls require licensing by
the customs authorities. In neither case is the licensing control based
on the nationality of the vessel to be serviced nor, in the latter
case, the type of materials used for repair or installed.


HONG KONG

While there has been no appreciable change in the already extensive
security controls maintained by the Hong Kong Government on exports to
Communist China and the Soviet bloc, there were changes in the laws and
legal processes under which these controls are enforced. The Emergency
(Importation and Exportation Ordinance) (amendment) Regulations,
1953, were promulgated July 10, 1953, in order to prevent evasions of
export and import controls. Eighteen modifications were made by these
Emergency Regulations. Among them were:

1. It was made an offence to transfer an export permit with intent to
deceive or to allow any other person to use a permit with intent to
deceive.

2. As court decisions in smuggling cases had thrown doubt on the
legality of searches and seizures carried out by the Royal Navy in
enforcing export regulations, an amendment in these Regulations
specifically authorizes "any commissioned officer of H. M. Armed
Forces" to carry out such duties.

3. "Any vessel not exceeding 250 gross tons and any vehicle which
is made use of in the importation and exportation or attempted
importation or exportation of any article contrary to the provisions
of this Ordinance or any regulation made thereunder shall be liable
to forfeiture whether or not any person is convicted of any offence."
This article was added to discourage truck owners and particularly,
junk masters, from agreeing to the use of their property for carriage
of smuggled goods, even though the main purpose of their trip is quite
legal. Thus, whether a conviction is obtained or not, the truck or junk
is liable to forfeiture.

Several other changes have also been made which were designed to
protect the rights of persons tried under the basic Ordinance by
bringing the Ordinance into line with usual British judicial practice.

During the past 6 months Hong Kong has added a number of items to its
prohibited export list and struck off a number. All of these actions
were taken in conformity with the decisions of the United Kingdom Board
of Trade.

There were no changes in the transit controls or shipping controls in
Hong Kong in the last 6 months of 1953.

In the field of financial controls, since October 1953, approved gold
and bullion dealers have been permitted to import nonresident-owned
gold solely for reexport. While in Hong Kong such gold must be in
the custody of an authorized bank. Such reexport is allowed only to
nonsterling area countries and on production of a valid import license
from the country of destination.


IRAN

The right to conduct foreign trade is vested in the Iranian Government
by the foreign trade monopoly law of 1931. From time to time the
Government grants by decree the right to conduct trade with respect to
certain commodities to private individuals and firms.


License Requirements

Exports are controlled primarily through the exercise of financial
controls. In general, laws and regulations governing export trade
are designed so that commodities that are in short supply, or which
would otherwise have to be replaced by imports, may not be exported.
Thus there is a standing prohibition against the export of gold and
silver in bars, sheets, or coins; cattle, sheep, raw hides, charcoal,
matches, butter, sugar, and tea. Also prohibited are exports of arms
and ammunition, precious stones other than turquoise and pearls, and
archeological articles. Only on rare occasions has the Government
authorized the export of any or these commodities.

Decrees currently in effect permit the export of all other commodities
without licensing procedure except those under Government monopoly,
such as opium, oil and tobacco, and except wheat, flour, barley,
legumes, rice, lumber and cotton. Depending on the availability of
these last-named commodities, export quotas are established for them
each year, and export licenses are issued by the Ministry of National
Economy to private individuals or firms to the extent of the quotas
established for each commodity.

The issuance of export licenses for lumber and cotton is subject to the
approval of the Ministry of Agriculture and the Iran Cotton Co. (an
agency of the Plan Organization), respectively. The export of opium and
tobacco, which are under Government monopoly, is subject to license of
the Ministry of Finance.

Some Iranian exports are effected under barter or clearing agreements
which Iran has concluded with a number of countries since 1940,
including the U.S.S.R., the Federal German Republic, France, Italy,
Czechoslovakia and Poland. Since quota lists under these agreements
specify the commodities involved, exports made thereunder are in effect
licensed by the agreements themselves.

Regulations promulgated on March 18, 1953, under the Law on the
Encouragement of Exports and the Issuance of Licenses to Engage in
Foreign Trade of December 22, 1952, require Iranian exporters to submit
a preexport declaration, in which they inform the Ministry of National
Economy of their intention to export stated commodities to stated
destinations. One copy of this declaration is certified by the Ministry
and must be returned to the exporter within 48 hours. A second copy
goes to the Customs Administration for use in inspecting the goods when
they actually leave the country.


Transit Controls

Goods having in transit through Iran may enter and leave the country
only at places where customs houses have been established for that
purpose. Detailed documentation is required by Iranian customs
authorities for goods in transit. In practice, there are very few
intransit shipments through Iran.

The reexport of specified goods of foreign origin is permitted under
a decree of November 11, 1953, which lists five categories of goods
eligible for reexport. Reexport of such goods, however, requires the
prior approval of a commission established in the Ministry of National
Economy, with representatives from a number of other Government
departments. Prior to this decree, reexport, of imported goods was
permissible only by decree of the Council of Ministers, which rarely
considered reexport cases. The new procedure represents a more workable
machinery for the licensing of reexports. It should at the same time
provide adequate safeguards against the reexport of strategic items.


Financial Controls

Exporters of Iranian goods must sign an undertaking that the exchange
derived from the export will be sold to a bank authorized by the
Government to deal in foreign exchange.


ISRAEL

License Requirements

All goods to be exported from Israel (including reexports), with
certain minor exceptions such as gift parcels and commercial samples
under I£10,000 in value and personal effects of tourists and
immigrants, require an export license. The Ministry of Commerce and
Industry is responsible for the control of most products. Outstanding
exceptions, with the Government department or agency responsible, are
as follows:

Military items--Ministry of Defense.
Fuel--Ministry of Finance.
Citrus--Citrus Marketing Board.

The Ministry of Commerce and Industry may ask for recommendations from
other ministries before licensing certain products, for example foods
and pharmaceuticals.

Israel voted to support the United Nations Resolution of May 18, 1951,
placing an embargo on shipments of arms and related material to China
and North Korea.


Transit Controls

The value of intransit trade is small, inasmuch as Israel is bounded on
three sides by Arab states with which no legal trade is conducted, but
commodities may be entered in bond without becoming subject to export
licensing controls. Before reshipment may take place, however, a permit
must be obtained from the Office of the Collector of Customs.


Financial Controls

The Israel Government exercises far-reaching control over the use of
foreign exchange, and it regularly uses this control to restrict the
movement of commodities in international trade. Israeli importers are
required to submit comprehensive justifications as to Israel's need for
a commodity before they are granted an allocation of foreign exchange.
Once the licenses have been granted, it has been to the interest of the
Government of Israel to make certain that the commodities are in fact
imported and used in the Israeli economy. This identity of interest
is a strong safeguard that materials consigned to Israel are not
reexported.


ITALY

License Requirements

All commodities listed in the new export tables dated March 16, 1953,
as amended, require an export license to all destinations except
Somaliland, which is issued by the Ministry of Foreign Trade. Goods
not listed in the export tables are exempt from license, but must
be exported in conformity with exchange regulations, which vary
according to the country of destination and clearing or other financial
agreements.

All items require an export license for shipment to the Soviet bloc,
including China.

Exports to the Soviet bloc also require bank validations, as virtually
all trade with the bloc is conducted under bilateral agreements which
specify the commodities that may be traded and the methods by which
payment is to be made. Normally, shipments to the East comprise only
those commodities specified in a trade agreement with an eastern
country. In order to facilitate checking of east-bound shipments, trade
with the Soviet bloc is funneled through selected frontier customs
points.

The formulation of export-control policy and the administration of
the export licensing system are the primary responsibility of the
Ministry of Foreign Trade. This Ministry is advised by a special
interministerial committee.

Italy is employing import-certificate delivery-verification procedures
and carries out end-use checks for shipments to destinations outside
the Soviet bloc, particularly for questionable transactions involving
goods of a strategic nature. The country of origin is notified if an
attempt is made to divert a shipment.


Financial Controls

Financial control over all export transactions is maintained
through the licensing system and through implementation of existing
exchange-control regulations.

Strict bilateral trade agreements with almost all members of the
Soviet bloc have constituted, in effect, a financial ceiling on
exports to Eastern Europe. Italian exports to Communist China, with
whom there is no trade agreement, must be paid for in hard currency or
must be exchanged for goods acceptable to the Italian Government, an
arrangement that has severely restricted Italo-Chinese trade. Italian
exchange control regulations would not normally permit payment for
imports from the Soviet bloc in hard currencies, although sterling is
occasionally used in payment for the few items not included in the
trade agreements. In certain instances ship charters are completed for
sterling when circumstances warrant or it is considered convenient.


Transit Controls

Direct and indirect transit shipments are subject to customs check,
which includes a screening of documents, physical inspection of goods
in case of doubt and control of the routing of shipments to prevent the
use of unnatural and unusual methods of transportation. In the case of
indirect transit shipments, a check is also made on the regularity of
the transaction from the foreign-currency standpoint. In doubtful or
suspect cases, customs, while not empowered to stop transit shipments,
is able to delay the transaction until the Ministry of Finance, in
conjunction with the Ministry of Foreign Affairs and other agencies,
obtains detailed information concerning the final destination. When an
investigation discloses that a transaction is not in order, the central
administration orders confiscation of the goods and prefers charges
against those responsible, if they are Italian nationals.

New regulations published in April 1953, imposed a more strict
financial control over indirect transit operations. Prior to this
time, certain firms and individuals who were officially authorized to
hold foreign currency accounts, were permitted to carry on transit
operations without making an application for foreign exchange in each
case. The new regulations withdrew this privilege, making it necessary
for all transit operators to submit an application to the General
Directorate for Currencies of the Ministry of Foreign Trade before
purchasing abroad any item listed in part A of the export tables (which
include strategic items). A later amendment to this regulation permits
a certain flexibility by allowing the transit operator to purchase
goods abroad and have them shipped to Italy before making application
to the Ministry of Foreign Trade. An operator making use of this
provision must submit to the bank which holds his currency account a
written commitment that the goods will be sent directly to Italy and
not diverted and must obtain the clearance of the General Directorate
for Currencies before the goods can be onforwarded through Italy to
another country.


Shipping Controls

The Ministry of Merchant Marine has drafted a bill which, when enacted
into law, will give the Italian Government the power to exercise
control over shipping traffic with countries of the Soviet bloc. The
bill contemplates quite severe penalties to be imposed upon owners and
masters of ships failing to comply with regulations established by the
Ministry of Merchant Marine. Consideration of this bill by Parliament
has been delayed for nearly 1 year, however, and there seems to be no
immediate prospect that it will be enacted into law.


Penalties

Penalties that may be imposed under Italian law for violations of
export-control regulations include (1) imprisonment up to 2 months,
(2) fines up to 40,000 lire, and (3) confiscation of the merchandise
involved. Persons and firms under investigation for illegal export
transactions are denied foreign trading privileges. However, an amnesty
law recently passed by the Italian Parliament has resulted in the
dropping of all charges outstanding against violators of the export
control regulations.

Irregularities under the customs law may be punished by fines from
2,000 to 20,000 lire, while other infractions may incur the penalties
contemplated by the penal code.


JAPAN

License Requirements

Licenses from the Japanese Ministry of International Trade and Industry
are required for exports of any commodity on the Japanese export
control list. No exports to North Korea have been permitted since the
outbreak of the Korean War. Exports to Communist China are limited to
nonstrategic items. Exports of strategic items to any other communist
bloc country are strictly controlled.

Strategic items embargoed by Hong Kong to Communist China are
licensed for export to Hong Kong by Japan only if an essential supply
certificate has been issued by the Hong Kong Government, and on exports
of lesser strategic items the Japanese licensing authorities require
end-use checks or reliable evidence that reexport to Communist China is
unlikely.

End-use checks are made also on suspicious exports of strategic items
to other destinations and the import certificate-delivery verification
procedure has been utilized since April 1, 1953.


Transit Controls

Intransit cargo is offloaded under customs supervision and is normally
kept in a bonded warehouse or other area under the complete control of
customs officials.

All offloaded intransit cargo is subject to the same export regulations
as indigenous exports.


Financial Controls

For balance-of-payments reasons, Japan closely controls its receipts
and expenditures of foreign exchange. These controls are not related
to security measures except indirectly in connection with trade with
Communist China and the Soviet Union.

Trade with these areas is largely confined to barter transactions which
must be settled on the basis of back-to-back or escrow letters of
credit approved by foreign exchange banks.


Shipping and Bunkering Controls

Since June 1951 it has been required that bills of lading issued by
carriers for strategic items licensed for export must contain a "Notice
to carrier" stating that delivery of the goods to countries other than
the destination designated in the export license is prohibited without
the express permission of the licensing authority.

Japanese shipowners have been notified that Japanese vessels are not
authorized to carry strategic goods to Communist China from Japan or
from any other country unless shipment has been licensed by a COCOM
country.

Administrative measures also have been adopted to prevent foreigners
from chartering or using Japanese vessels to carry contraband goods
to Communist China or North Korea. The Ministry of Transportation has
announced that applications for approval of a bare boat or time charter
of a Japanese vessel to a foreigner must show that the charterer has
guaranteed that during the period of the charter the vessel will not
enter any port in Communist China or North Korea with strategic goods
on board the vessel unless the shipment has been licensed by a COCOM
country.

The Ministry of International Trade and Industry furthermore has
instructed Japanese oil companies not to furnish fuel bunkers to any
vessels carrying strategic goods to Communist China or North Korea
unless the shipment has been licensed by a COCOM country.


REPUBLIC OF KOREA

License Requirements

Foreign trade in the Republic of Korea is governed by regulations
issued by the Ministry of Commerce and Industry. Licenses are required
for all exports to all destinations and are issued by the Ministry
of Commerce and Industry only to registered foreign traders, or
to manufacturers for their own products. A certificate of final
destination (or pledge to submit such a certificate) must accompany all
exports license applications.

Registration as a foreign trader is canceled when a trader does
business with individuals or juridical persons under a Communist
government. Delivery of arms, ammunition and other goods for military
use to enemy countries is a criminal offense.


Financial Controls

Foreign exchange proceeds from exports are subject to the control of
the Bank of Korea.


Shipping Controls

Vessels engaged in foreign trade are required to submit their manifests
upon entry into an open port and are prohibited from proceeding to
a foreign country except by way of an open port. Transshipment from
one vessel engaged in foreign trade to another is prohibited unless
authorized by the Collector of Customs. Vessels engaged in domestic
trade cannot load export goods unless the goods are shipped in bond.


THE NETHERLANDS

License Requirements

All exports from the Netherlands are subject to export licenses.
Export licenses for industrial commodities are issued by the Central
Bureau of Imports and Exports (CDIU) at The Hague, which has delegated
this authority to a number of so-called trade-control boards. For
agricultural products, licenses are granted by the Ministry for
Agriculture, which for a large number of commodities has delegated
this function to the "agricultural-monopoly holders." The latter
are state-supervised and semiofficial organizations, similar to the
trade-control boards.

In certain instances, the exporter may make out his own export license
which must be dated and initialed by an officer of the CDIU.


Transit Controls

Goods passing in transit through the Netherlands, including strategic
commodities, are not subject to any controls except for a customs check
to insure that goods in transit leave in the same form in which they
have entered.

The Netherlands has adopted import certificate-delivery verification
procedures.


Financial Controls

All transactions of a Netherlands resident involving payment of moneys
to or from a party abroad are subject to a foreign-exchange license,
issued by the Netherlands Bank. The export license generally includes
the authorization of the banks for the proposed transaction.


Shipping Controls

The Netherlands instituted voyage controls in May 1953, aimed at
preventing the carriage of strategic commodities by Netherlands
ships to Communist China and North Korea except pursuant to special
permission.


NORWAY

License Requirements

All commodities to be exported to any destination require export
licenses. The licensing authorities using existing powers can prevent
the export of any item for security reasons.


Transit Controls

Goods which are to pass through the territory of Norway may be
reexported without license only if it is clearly stated by their
conveying documents that the goods are going straight to foreign
destination. If the reexport does not take place within 90 days, a
Norwegian export license must be secured. The destination listed on
the original documents must remain the same, and the goods may not be
transformed in any way during their stay in the country. The customs
authority applies a control to that effect. There are no free-port
areas in Norway.

Norway has adopted import certificate-delivery verification procedures.


Financial Controls

Strict exchange controls are maintained by the Government through the
Bank of Norway. The granting of an export license carries with it
the obligation on the part of the exporter to relinquish the foreign
exchange to the Bank of Norway as soon as received from the foreign
buyer; a maximum of 60 days is allowed between export and remittance,
although under certain circumstances the Government may grant the
exporter an extension of time. Transfers of capital from Norway require
the prior approval of the Bank of Norway.


Shipping Controls

The Norwegian Foreign Office announced publicly in April 1953 that the
Norwegian war risk insurance group had refused to insure Norwegian
vessels delivering strategic articles to Communist Chinese and North
Korean ports. The foreign office also announced that Norwegian ships
had not violated the United Nations resolution prohibiting the shipment
of strategic material to Communist China and North Korea. Several
allegations that they had done so had been investigated and found to be
unjustified.


PAKISTAN

License Requirements

Pakistan's export controls are exercised under the authority of the
Imports and Exports (Control) Act, 1950 (Act No. XXXIX) as amended
by the Imports and Exports (Control) Amendment Act, 1953 (Act No. IX
of 1953), which extends the life of the 1950 act for 3 years, until
April 18, 1956. The act empowers the Central Government to prohibit,
restrict, or otherwise control the import or export of goods of
any specified description, or regulate generally all practices and
procedures connected with the import or export of such goods. Under an
export trade control notification of 1948, which is still in effect,
numerous categories embracing strategic or short-supply materials
have been established for which no licenses are granted. Pakistan
prohibits the reexport in their original form of all imported materials
regardless of origin except in specific cases, each of which is
examined on its own merits. With respect to goods of domestic origin,
Pakistan encourages exports to all countries of such goods as are
surplus to her own requirements and encourages shipments to the dollar
area by placing selected items on an open general license specifically
applicable to the dollar area.


Transit Controls

Pakistan has issued special transit regulations to govern trade passing
through that country to Afghanistan. Strict control is maintained,
moreover, at the ports to insure against unauthorized transit shipments.


Financial Controls

Pakistan has promulgated exchange control regulations which insure the
surrender to the State Bank of Pakistan or its authorized agents of all
foreign exchange derived from export transactions.


Shipping Controls

The Control of Shipping Act, 1947 (Act XXIV), approved by the Central
Government as amended by Ordinance V of June 22, 1951, provides for the
control of shipping. Under this act a shipping authority appointed by
the Central Government licenses vessels of both Pakistan and foreign
registry which participate in coastal traffic. This act was recently
extended through March 31, 1959.


PORTUGAL

License Requirements

All exports are subject to licensing under regulations issued in 1948
except that export licenses are not generally required for shipments to
Portuguese overseas provinces. Portugal's export trade with the Soviet
bloc is not important and consists almost entirely of cork, which is
not on any strategic or restricted list. The Portuguese colonies exert
varying degrees of export control. On January 23, 1952, the Government
of Macao adopted a trade-control system which requires a license for
the import and the export of strategic materials. Strategic materials
are shipped from Portugal to Macao only against import certificates
issued by that province.


Transit Controls

Portuguese controls over goods in transit are not wholly effective
in that no export license is required if goods in transshipment are
reexported within 60 days after being placed in bond.

Financial control is exercised over all exports as a part of the
license control system.


SINGAPORE

Licensing Requirements

Colonial legislative authority for control of imports and exports is
exercised under the Control of Imports and Exports Ordinance of 1950,
which places the issuance of all licensing, both general and special,
under the absolute discretion of the Controller of Imports and Exports.
Under this general authority, all exports are carefully controlled.
Strategic commodities, in particular, are controlled in accordance
with UK-adopted strategic trade controls with respect to exports to
all Soviet bloc destinations. In addition, a special list of goods is
embargoed to Communist China and North Korea, and subject to Essential
Supply Certification if such goods are to be exported from Singapore to
Hong Kong. Amendments to the latter embargo list adopted by the United
Kingdom are promptly reflected in Singapore.

Many commodities are subject to special licensing controls under
exchange restrictions or emergency regulations. The only exemptions to
licensing are goods transitting the colony on a through bill of lading,
and those shipments customarily exempted in international trade, such
as parcel post shipments under $50, etc.


Transit Controls

Goods which transit the port of Singapore without offloading are
subject to no control. Goods which are landed in the colony for the
purpose of transshipment on a through bill of lading to another
destination are also subject to no local license or declaration, as
long as such goods remain in the custody of the harbor board or of the
agent of the ship from which landed. Transshipment goods not on through
bills are treated as reexports, and are subject to full export control.


Shipping Controls

The United Kingdom Control of Trade by Sea Order (China and North
Korea) 1953, went into effect in Singapore on March 31, 1953. Since
that time, measures taken to implement the order effectively have
included placing all bunkering of ships, either coal or oil, of over
500 gross registered tons, on a local licensing basis. This places
bunkering under the control of the Controller of Exports and Imports.
Voyage licensing of vessel is under the control of the Master Attendant.


TURKEY

Export Controls

Under the new foreign trade regime, Turkish exports are grouped in
two lists. List I contains all Turkish export commodities, the export
of which is unrestricted unless they also appear on list II. A simple
customs exit declaration based on the exporter's application is all
which is necessary to realize list I exports. List II designates
commodities requiring export licenses. The export license can be
obtained from the Ministry of Economy and Commerce or agencies so
designated by the said Ministry. List II items may also be exported
by certain Government or semigovernmental agencies only. The list
II commodities subject to such licensing procedure are as follows:
cereals (barley, wheat, rye, corn, oats, and rice) and cereal products
(semolina, macaroni, starch, noodles, flour); animal products (butter);
dried fruits and nuts (pistachios shelled or unshelled, seedless dried
raisins); minerals and mineral products (asbestos, copper, copper waste
and scrap, copper plates, bars and wires); copper alloys and copper
alloy products; barite; steel and iron waste and scrap; zinc ore;
zinc mixed with lead; iron ore and pyrites; pig iron; iron products
and waste and scrap; ferro-manganese; graphite; calco-pyrite; chrome
ore; lead ore; sulphur ore; stone coal; mineral waste; coke and coke
dust; manganese ore; molybdenum; tin waste; raw materials for textiles
(cotton linters, greasy wool); vegetable oils (olive oil, margarines);
tobacco and opium (tobacco processed and leaf, opium); creosote and
xylol; sodium fluoro-silicate; toluol; mineral oils mixed with phenol
and naphtha; straw; pistols and ammunition.


Transit Controls

There is no large amount of intransit trade in Turkey. All intransit
goods arriving in Turkey, however, must carry on all shipping documents
(including bill of lading and ship manifest) and outer containers the
name of the Turkish port, the phrase "in transit to" and the name of
the city and country of destination.

Generally, goods moving intransit through Turkey may be imported only
through customs warehouses.

Extensive documentation, including a reexport license, is required for
clearance by the Turkish Customs Administration.


Financial Controls

Export-control measures are designed for two purposes: (1) to keep a
check on outgoing strategic or short-supply materials, and (2) they
are instituted also for foreign-exchange reasons. For price-checking
purposes in order that foreign-exchange losses can be prevented,
exporters must register with agencies designated by the Ministry of
Finance. Customs authorities do not permit exportation without a
certificate of registration and destination. All foreign currency
receipts are turned over to the Central Bank of Turkey.


UNITED KINGDOM

License Requirements

The export control system in the United Kingdom is similar to but
not identical with that of the United States. It is administered by
the Board of Trade. Although the present system grew out of measures
originally promulgated at the start of World War II, its primary
purpose now is the safeguarding of the country's requirements of
strategic and short-supply goods, and the restriction of the flow of
such items to undesirable destinations. The United Kingdom security
trade control program was instituted in 1947.

The United Kingdom export control mechanism operates in the following
manner:

The consolidated order, which encompasses all the items subject to
control, is a published document and revisions are issued in the
form of statutory orders which are also published in the Board of
Trade Journal (an official weekly). The list is arranged into three
schedules. The first schedule lists goods which, in general, cannot
be exported to any destination without a license. The second schedule
lists additional goods (mostly foodstuffs) which, in general, can be
exported to any destination without a license. The two schedules are,
however, subject to two qualifications. Firstly, a limited number of
goods included in the first schedule can be exported without license
to destinations within the British Commonwealth (except Hong Kong),
Ireland, and the United States. Such goods are listed in the third
schedule. Secondly, no goods, even those included on the second
schedule, can be exported without license to China, Hong Kong, Macao,
or Tibet.

The extent of the restriction on individual items is reflected in the
administration of the control. Strict control is maintained over items
which are prohibited exportation to certain areas, as, for instance,
aircraft, firearms, ammunition, atomic materials. The exportation of
a wide range of goods of strategic importance, including rubber, to
Communist China is prohibited, as is the exportation to the Soviet
bloc in Europe of a somewhat narrower range of commodities. The export
to the Soviet bloc of many other items is subject to limitations as
to quantities permitted to be shipped. In addition, there is the
great bulk of items on which control is achieved through case-by-case
scrutiny of individual license applications.


Transit Controls

The United Kingdom has had in effect since November 1951 a system
whereby about 250 items of strategic importance arriving from other
countries are subject to transshipment control. Individual licenses are
required for all of the items on the licensing list before any of the
goods, after being landed in the United Kingdom, can be transshipped
to any destination other than the British Commonwealth (except Hong
Kong), Ireland, and the United States. In administering the control,
the British authorities normally grant licenses when they are satisfied
that the goods will not be diverted to the Soviet bloc, China, etc.,
contrary to the wishes of the exporting country.

The United Kingdom has effectively implemented import
certificate-delivery verification procedures.


Shipping Controls

In order to restrict further the flow of strategic goods to China
and as an additional measure of control, a statutory order (titled
the Control of Trade by Sea (China and North Korea) Order, 1953) was
made on March 13, 1953, pursuant to which the Ministry of Transport
and Civil Aviation is empowered to control all shipping to China and
North Korea. In essence, the order applies to all British ships having
a gross tonnage of 500 tons, limits the type of trade in which the
ships may engage and the voyages which may be undertaken, affects the
class of cargo or passengers which may be carried, and imposes certain
conditions on the hiring of ships. Approximately a hundred items are
listed in a schedule which is an integral part of the license issued
under the order in question. These items are banned from carriage to
China in British flag vessels.

While formal shipping controls were not adopted until March 17, 1953,
British shipping circles were kept under fairly close scrutiny by the
Government ever since the adoption on May 18, 1951, by the Additional
Measures Committee of the United Nations of the resolution to apply
economic sanctions against China as a result of her aggressive
intervention in Korea.

Complementary controls over the bunkering of vessels carrying strategic
cargo (as defined in the Shipping Control Order) to China were adopted
at the same time that the order affecting shipping became operative.
These controls are administered by the Ministry of Fuel and Power on an
informal basis, in cooperation with British oil companies which deny
bunkers to ships carrying strategic cargo to China.


UNITED STATES

Export Controls in General

The Department of Commerce is responsible for controls over nearly all
commercial exportations from the United States under the Export Control
Act of 1949, as extended.

The Department of State is responsible for control over the exportation
of arms, ammunition, and implements of war; the Atomic Energy
Commission administers controls over the export of major atomic energy
items; and the Department of Treasury administers controls over the
exportation of gold and narcotics. All such items required export
licenses, and shipments to the Soviet bloc are not permitted.


Administration of Export Controls by Commerce Department

All commodities exported to any destination, except Canada, from the
United States, its territories and possessions are subject to export
control. There are three main techniques utilized in the administration
of such controls:

1. Shipments of commodities contained in the Positive List[3] are under
control to virtually all destinations;

2. For some commodities, a general license is authorized permitting
exportation to virtually all friendly destinations without requiring
that an export license be issued;

3. All commodities, whether or not on the Positive List and
irrespective of any general license provisions, are under licensing
control to subgroup A destinations (i.e., Soviet Bloc, including
Communist China and North Korea), Hong Kong and Macao.

The Comprehensive Export Schedule published by the Bureau of Foreign
Commerce (BFC) of the Department of Commerce must be consulted in
order to determine whether a validated license is required for the
exportation of a given commodity to a specific destination as well
as to determine other export control regulations of the Commerce
Department. The Comprehensive Export Schedule is supplemented 2 or
3 times a month by BFC's Current Export Bulletin. The Secretary of
Commerce's Quarterly Report to the President and the Congress reports
major policy changes and activities of the Department of Commerce in
carrying out its export control activities.

The two main policies as indicated in the Export Control Act which
is administered by the Department of Commerce are export controls
for security and for short supply reasons. The objective of security
controls as embodied in the Export Control Act of 1949, as extended, is
to exercise the necessary vigilance over exports from the standpoint
of their significance to the national security. The controls were
designed to deny or restrict the exportation of strategic commodities
to the Soviet bloc in order to impede the buildup and maintenance of
the Soviet war potential. Shipments of all commodities to Communist
China and North Korea are embargoed while shipments to the European
Soviet bloc, Hong Kong, and Macao are either denied or restricted.
In addition, all proposed shipments of strategic commodities to all
destinations, except Canada, are carefully scrutinized to assure that
the goods will not be transshipped or diverted to unfriendly hands. The
Commerce Department has developed procedures to prevent the frustration
of our own export controls which would result from shipping a strategic
item to a country which (1) ships identical or closely similar items
to the Soviet bloc, or (2) would use the American item directly in the
manufacture of strategic items for the Soviet bloc.

In order to prevent the transshipment abroad of United States
commodities, the Department of Commerce also has regulations covering
the unauthorized movement of United States commodities after they
leave United States shores. These regulations generally referred to
as the "destination control" provisions are designed to prohibit the
reexportation from the country of ultimate destination except upon
written authorization from BFC. These regulations also restrict ships,
planes or other carriers from delivering United States origin goods to
other than the destination specified on the export control documents.
In addition, the United States participates in the international IC/DV
(import certificate--delivery verification) system described elsewhere
in this report.

In addition to United States export controls for security reasons, it
is necessary to administer export controls for short supply reasons
in order to protect the domestic economy from the excessive drain of
scarce materials and to reduce the inflationary impact of abnormal
demand. Such controls are usually exercised by means of export programs
or quotas fixed by the Secretary of Commerce. The easing of supply
programs in recent months has led to the prompt lifting of nearly all
domestic controls over materials: such actions have generally been
followed by the relaxation of related export controls for short supply
reasons. Thus, export controls for short supply reasons do not play as
important a part as before in comparison with security controls.

[3] The Positive List of Commodities is a current list contained in the
Comprehensive Export Schedule showing the commodities which require a
validated license from the Bureau of Foreign Commerce of the Department
of Commerce.


Transit Controls

A validated export license is required for the exportation from any
seaport, land frontier, airport, or foreign trade zone in the United
States of certain strategic goods in transit through the United
States which originate in or are destined for a foreign country. The
commodities so controlled are the ones which are identified on the
United States Department of Commerce Positive List by an asterisk.


Shipping Controls

Department of Commerce Transportation Order T-1 denies any United
States-registered vessel or aircraft authority to carry items listed
on the Positive List, or arms, ammunition and implements of war or
fissionable material, to any Soviet bloc destination, Hong Kong or
Macao without a validated license issued by BFC or other appropriate
licensing agencies or the express permission of the Under Secretary of
Commerce for Transportation. This order includes shipments from foreign
ports as well as from the United States.

Department of Commerce Transportation Order T-2 has the effect of
preventing the transportation of any commodities directly or indirectly
to Communist China, North Korea, or areas under their control, by
United States-registered vessels or aircraft. It also prohibits
American ships and aircraft from calling at any port or place in
Communist China.

A validated license is required for delivery in United States ports of
specified types of petroleum and petroleum products to foreign vessels,
if the foreign carrier has called at any point under Far Eastern
Communist control, or at Macao, since January 1, 1953, or will carry
commodities of any origin from the United States destined directly or
indirectly for any such point within a period of 120 days in the case
of a vessel, or 30 days in the case of any aircraft. This regulation
also requires that if a carrier is registered in or under charter to a
Soviet-bloc country or is under charter to a national of a Soviet-bloc
country it will be necessary to apply to BFC for a validated license.

American petroleum companies at certain foreign ports are prohibited
without a Treasury Department authorization from bunkering any vessel
bound for a Communist Far East port or Macao or which is carrying goods
destined for Communist China or North Korea. Similar restrictions apply
to the bunkering by these companies of vessels returning from Communist
Far East ports or Macao.


Financial and Transaction Controls

The Foreign Assets Control Regulations, administered by the Treasury
Department, block the assets here of Communist China, North Korea and
their nationals and prohibit unlicensed dealings involving property in
which Communist China, or North Korea, or their nationals, have any
interest. The regulations prevent the use of United States financial
facilities by those countries and their nationals. These regulations
also prohibit the unlicensed importation of goods of Chinese Communist
or North Korean origin.

Treasury regulations also prohibit Americans, including foreign
subsidiaries of United States firms, from participating in the purchase
or sale of certain important commodities for ultimate shipment from any
country outside the United States to the countries of the Soviet bloc.
These transactions controls, which are complementary to the United
States export control laws, are administered by the Treasury Department
under Foreign Assets Control Regulations.



_APPENDIX B_

=Statistical Tables=


 Table 1. Free-world trade with Soviet Bloc, 1948 through 1953.
 Table 2. Exports of principal free-world countries to Soviet Bloc,
           1951, 1952, and 1953.
 Table 3. Imports of principal free world countries from the Soviet
           Bloc, 1951, 1952, and 1953.
 Table 4. Free-world exports to the Soviet Bloc, monthly, 1952 and
           1953.
 Table 5. Free-world imports from the Soviet Bloc, monthly, 1952
           and 1953.
 Table 6. Free-world exports to Communist China, semiannual 1952
           and 1953.
 Table 7. Free-world imports from Communist China, semiannual
           1952 and 1953.
 Table 8. United States trade with the Soviet-Bloc countries, 1937,
           1948, 1952 and 1953.

TABLE 1.--_Free-world trade with Soviet bloc, 1948 through 1953_

            [In millions of United States dollars]
 ----------------------------------------------------------------------
                          | 1948 | 1949 | 1950 | 1951 | 1952 | 1953   |
                          |      |      |      |      |      |(est.)  |
 -------------------------+------+------+------+------+------+--------|
 Free-World exports to:   |      |      |      |      |      |        |
   Entire bloc            | 1,969| 1,680| 1,545| 1,685| 1,422|   1,350|
                          |------+------+------+------+------+--------|
       U.S.S.R.           |   533|   437|   301|   386|   481|     410|
       European satellites|   902|   919|   792|   853|   672|     660|
       China              |   534|   324|   452|   446|   268|     280|
                          |======+======+======+======+======+========|
 Free-World imports from: |      |      |      |      |      |        |
   Entire bloc            | 2,005| 1,788| 1,727| 1,879| 1,608|[4]1,580|
                          |------+------+------+------+------+--------|
       U.S.S.R.           |   492|   272|   252|   397|   462|     380|
       European satellites| 1,026| 1,090|   940|   960|   780|     766|
       China              |   487|   426|   535|   522|   366|     425|
 -------------------------+------+------+------+------+------+---------

 [4] Includes $9 million imported by United States from Outer Mongolia.

NOTE.--Figures unadjusted for price changes. China data since 1949
refer, so far as possible, to Mainland (Communist) China including
Manchuria and Inner Mongolia.

Source: Official statistics of Free-World Countries, compiled by
U. S. Department of Commerce.


TABLE 2.--_Exports of principal free-world countries to Soviet bloc,
1951, 1952, and 1953_

            [In millions of U. S. dollars]
 --------------+------------------------------------+-----------------------
          |        Exports to world         |   Exports to Soviet bloc
 Country  +--------+--------+---------------+-----+------+------------
          |  1951  |   1952 |      1953     | 1951| 1952 |     1953
          |        |        |  as indicated |     |      | as indicated
 ---------+--------+--------+---------------+-----+------+------------
 Anglo-   |        |        |               |     |      |
  Egyp.   |        |        |Jan.-          |     |      |Jan.-
   Sudan  |   183.5|   122.6|  Dec.    127.5|  0.8|  0.7 |  Dec.   0.1
          |        |        |Jan.-          |     |      |Jan.-
 Argentina| 1,152.3|   702.3|  Aug.    790.4| 34.5| 12.2 |  Aug.  11.3
          |        |        |Jan.-          |     |      |Jan.-
 Australia| 2,047.0| 1,716.2|  Dec.  1,977.2| 55.5|  8.9 |  Dec.  61.5
          |        |        |Jan.-          |     |      |Jan.-
 Austria  |   453.8|   505.5|  Dec.    532.9| 60.5| 64.4 |  Dec.  58.4
 Belgium- |        |        |               |     |      |
  Luxem-  |        |        |Jan.-          |     |      |Jan.-
    bourg | 2,651.4| 2,451.0|  Dec.  2,259.3| 64.4| 60.1 |  Dec.  66.1
          |        |        |Jan.-          |     |      |Jan.-
 Brazil   | 1,757.4| 1,408.8|  Nov.  1,363.7|  7.9|  6.5 |  Nov.  10.7
          |        |        |Jan.-          |     |      |Jan.-
 Canada   | 3,608.0| 4,396.4|  Dec.  4,184.8|   .9|   .6 |  Dec.    .5
          |        |        |Jan.-          |     |      |Jan.-
 Ceylon   |   399.9|   315.5|  Dec.    329.3|  8.5| 28.9 |  Dec.  51.5
          |        |        |Jan.-          |     |      |Jan.-
 Chile    |   376.8|   461.8|  Aug.    229.2| [5] | [5]  |  Aug.  (--)
          |        |        |Jan.-          |     |      |Jan.-
 Denmark  |   838.8|   849.1|  Dec.    893.9| 40.0| 33.9 |  Dec.  44.3
    [6]   |        |        |               |     |      |
          |        |        |Jan.-          |     |      |Jan.-
 Finland  |   866.5|   717.3|  Dec.    572.0|148.4|183.5 |  Dec. 179.3
          |        |        |Jan.-          |     |      |Jan.-
 France   | 4,240.6| 4,046.9|  Dec.  4,019.4| 40.5| 42.1 |  Dec.  63.3
 French   |        |        |Jan.-          |     |      |Jan.-
  Morocco |   251.9|   273.8|  Dec.    268.1|  3.1|  1.5 |  Dec.   1.9
 Germany, |        |        |               |     |      |
  Fed.    |        |        |Jan.-          |     |      |Jan.-
   Repub. | 3,508.3| 4,072.4|  Dec.  4,477.9|103.1| 88.2 |  Dec. 139.4
 Gold     |        |        |Jan.-          |     |      |Jan.-
  Coast   |   255.5|   241.6|  Sept.   192.4|  9.6| 12.0 |  Sept.  8.1
          |        |        |Jan.-          |     |      |Jan.-
 Greece   |   101.8|   119.9|  Dec.    132.0|   .4|   .4 |  Dec.   8.3
          |        |        |Jan.-          |     |      |Jan.-
 Hong Kong|   775.8|   509.8|  Dec.    478.4|280.7| 91.0 |  Dec.  94.6
          |        |        |Jan.-          |     |      |Jan.-
 Iceland  |    44.6|    39.3|  Dec.     43.4|  3.5|  2.8 |  Dec.   8.6
          |        |        |Jan.-          |     |      |Jan.-
 India    | 1,645.8| 1,299.3|  Nov.  1,001.5| 30.9| 12.7 |  Nov.   9.2
          |        |        |Jan.-          |     |      |Jan.-
 Indonesia| 1,230.7|   911.1|  Dec.    819.5|  2.3|  9.8 |  Dec.   4.5
          |        |        |Jan.-          |     |      |Jan.-
 Iran     |   590.6|   152.4|  Dec.    125.7| 22.6| 25.6 |  Dec.  16.6
          |        |        |Jan.-          |     |      |Jan.-
 Ireland  |   228.0|   284.1|  Dec.    319.2|   .1| [5]  |  Dec.    .4
          |        |        |Jan.-          |     |      |Jan.-
 Israel   |    44.8|    34.2|  Oct.     47.7|  2.1|[7]2.1|  Oct.   1.2
          |        |        |Jan.-          |     |      |Jan.-
 Italy    | 1,629.3| 1,382.8|  Dec.  1,488.1| 65.7| 58.7 |  Dec.  62.7
          |        |        |Jan.-          |     |      |Jan.-
 Japan    | 1,354.5| 1,272.9|  Dec.  1,273.6|  5.8|   .8 |  Dec.   4.6
          |        |        |Jan.-          |     |      |Jan.-
 Malaya   | 1,957.1| 1,239.7|  Dec.    951.1| 92.9| 30.3 |  Dec.  35.5
          |        |        |Jan.-          |     |      |Jan.-
 Mexico   |   629.7|   592.5|  Sept.   386.0|   .6|   .5 |  Sept.   .2
 Nether-  |        |        |Jan.-          |     |      |Jan.-
  lands   | 1,956.1| 2,113.4|  Dec.  2,021.4| 40.0| 36.4 |  Dec.  60.8
 New      |        |        |Jan.-          |     |      |Jan.-
  Zealand |   694.8|   674.3|  Dec.    659.7| 26.1| 10.0 |  Dec.  14.9
          |        |        |Jan.-          |     |      |Jan.-
 Norway   |   620.0|   565.4|  Dec.    508.6| 29.2| 30.0 |  Dec.  32.9
          |        |        |Jan.-          |     |      |Jan.-
 Pakistan |   749.8|   532.5|  Dec.    438.8| 72.6|119.6 |  Dec.  19.8
          |        |        |Jan.-          |     |      |Jan.-
 Portugal |   262.9|   237.2|  Dec.    218.8|  4.8|  7.1 |  Dec.   5.7
          |        |        |Jan.-          |     |      |Jan.-
 Spain    |   477.7|   403.5|  Oct.    383.9|   .4|   .3 |  Oct.  [1]
          |        |        |Jan.-          |     |      |Jan.-
 Sweden   | 1,178.5| 1,561.1|  Dec.  1,477.0|126.7|119.0 |  Dec.  69.7
 Switzer- |        |        |Jan.-          |     |      |Jan.-
  land    | 1,082.0| 1,100.1|  Dec.  1,204.3| 86.0| 60.4 |  Dec.  60.8
          |        |        |Jan.-          |     |      |Jan.-
 Turkey   |   314.0|   362.9|  Oct.    306.5| 24.7| 20.3 |  Oct.  22.8
 United   |        |        |Jan.-          |     |      |Jan.-
  Kingdom | 7,578.3| 7,541.5|  Dec.  7,524.7|119.6|155.7 |  Dec.  92.7
 United   |        |        |Jan.-          |     |      |Jan.-
  States  |16,602.3|15,176.3|  Dec. 15,747.4|  2.8|  1.1 |  Dec.   4.8
 ---------+--------+--------+---------------+-----+------+------------

 [5] Less than $50,000.
 [6] Includes reparations deliveries to U.S.S.R. valued at $53,899,000
 in 1951 and $35,719,000 in January-September 1952 when reparation
 deliveries were terminated. Also includes transfers of "former German
 assets" to the ceded territory of Janiskoski, valued at $15,000 in 1951.
 [7] January-September only.
 (--) None.

NOTE.--Soviet bloc countries are Albania, Bulgaria, Czechoslovakia,
Soviet Zone of Germany, Hungary, Poland, Rumania, U.S.S.R., Outer
Mongolia, and China (data as far as possible refer to Mainland China,
including Manchuria and Inner Mongolia). Exports include reexports for
the following countries: Anglo-Egyptian Sudan, Australia, Ceylon, Gold
Coast, Hong Kong, India, Ireland, Japan, Malaya, Mexico, New Zealand,
Pakistan, United Kingdom, and United States. All other countries exclude
reexports.

Source: Official trade statistics of listed countries, compiled by
U. S. Department of Commerce.


TABLE 3.--_Imports of principal free-world countries from the Soviet
   bloc, 1951, 1952, and 1953_
                     [In millions of U. S. dollars]
 ---------+---------------------------------+-------------------------
          |          Imports from world     | Imports from Soviet bloc
  Country +---------------------------------+-------------------------
          |   1951 |   1952 |      1953     | 1951| 1952 |   1953
          |        |        | as indicated  |     |      |as indicated
 ---------+--------+--------+---------------+-----+------+------------
 Anglo-   |        |        |               |     |      |
  Egyp.   |        |        |Jan.-          |     |      |Jan.-
   Sudan  |   120.6|   175.3|  Dec.    145.5|  3.5|   5.2|  Dec.   3.6
          |        |        |Jan.-          |     |      |Jan.-
 Argentina| 1,360.8| 1,178.3|  Aug.    483.2| 38.6|  17.1|  Aug.   9.3
          |        |        |Jan.-          |     |      |Jan.-
 Australia| 2,112.5| 1,733.8|  Dec.  1,298.5| 37.8|  14.7|  Dec.  10.8
          |        |        |Jan.-          |     |      |Jan.-
 Austria  |   652.7|   653.6|  Dec.    541.2| 72.0|  73.6|  Dec.  60.4
 Belgium- |        |        |               |     |      |
  Luxem-  |        |        |Jan.-          |     |      |Jan.-
   bourg  | 2,544.0| 2,460.5|  Dec.  2,422.6| 57.8|  37.4|  Dec.  47.4
          |        |        |Jan.-          |     |      |Jan.-
 Brazil   | 2,010.6| 2,009.5|  Nov.  1,215.8| 10.3|   5.9|  Nov.   8.0
          |        |        |Jan.-          |     |      |Jan.-
 Canada   | 3,877.1| 4,120.3|  Dec.  4,449.4|  8.1|   8.7|  Dec.   6.0
          |        |        |Jan.-          |     |      |Jan.-
 Ceylon   |   327.3|   357.5|  Dec.    337.6|  2.4|   8.0|  Dec.  45.5
          |        |        |Jan.-          |     |      |Jan.-
 Chile    |   329.1|   371.0|  Aug.    213.7|  1.8|    .8|  Aug.   1.2
          |        |        |Jan.-          |     |      |Jan.-
 Denmark  | 1,012.5|   962.1|  Dec.  1,000.3| 70.7|  39.2|  Dec.  40.6
          |        |        |Jan.-          |     |      |Jan.-
 Finland  |   676.0|   791.7|  Dec.    529.8|108.2| 153.5|  Dec. 182.3
          |        |        |Jan.-          |     |      |Jan.-
 France   | 4,614.8| 4,547.3|  Dec.  4,166.1| 71.1|  64.2|  Dec.  56.9
 French   |        |        |Jan.-          |     |      |Jan.-
  Morocco |   456.2|   515.8|  Dec.    490.1| 15.8|   8.6|  Dec.  13.2
 Germany, |        |        |               |     |      |
  Fed.    |        |        |Jan.-          |     |      |Jan.-
    Repub.| 3,532.2| 3,873.3|  Dec.  3,877.4|131.8|  94.0|  Dec. 168.0
 Gold     |        |        |Jan.-          |     |      |Jan.-
  Coast   |   177.3|   186.4|  Sept.   143.3|  2.2|   1.6|  Sept.  1.5
          |        |        |Jan.-          |     |      |Jan.-
 Greece   |   398.4|   346.3|  Dec.    294.3|   .6|    .6|  Dec.   3.8
          |        |        |Jan.-          |     |      |Jan.-
 Hong Kong|   852.3|   661.4|  Dec.    677.7|155.1| 146.6|  Dec. 150.0
          |        |        |Jan.-          |     |      |Jan.-
 Iceland  |    56.7|    55.8|  Dec.     68.2|  3.9|   3.7|  Dec.   6.3
          |        |        |Jan.-          |     |      |Jan.-
 India    | 1,767.8| 1,657.0|  Nov.  1,100.6| 38.4|  38.8|  Nov.   6.0
          |        |        |Jan.-          |     |      |Jan.-
 Indonesia|   805.3|   924.0|  Dec.    753.0|  6.7|   5.3|  Dec.   6.9
          |        |        |Jan.-          |     |      |Jan.-
 Iran     |   249.1|   165.2|  Dec.    152.5| 23.6|  27.4|  Dec.  18.3
          |        |        |Jan.-          |     |      |Jan.-
 Ireland  |   572.6|   482.2|  Dec.    513.6|  7.8|   2.3|  Dec.   2.7
          |        |        |Jan.-          |     |      |Jan.-
 Israel   |   343.3|[8]280.3|  Oct.    233.7| 10.5|[8]4.8|  Oct.   2.1
          |        |        |Jan.-          |     |      |Jan.-
 Italy    | 2,118.7| 2,313.3|  Dec.  2,395.1| 80.0|  86.4|  Dec.  53.8
          |        |        |Jan.-          |     |      |Jan.-
 Japan    | 1,940.9| 2,028.2|  Dec.  2,409.5| 23.1|  17.9|  Dec.  37.8
          |        |        |Jan.-          |     |      |Jan.-
 Malaya   | 1,542.1| 1,256.9|  Dec.  1,054.4| 46.7|  42.5|  Dec.  40.3
          |        |        |Jan.-          |     |      |Jan.-
 Mexico   |   783.0|   739.2|  Sept.   539.1|  2.1|   1.5|  Sept.   .8
 Nether-  |        |        |Jan.-          |     |      |Jan.-
  lands   | 2,561.3| 2,257.2|  Dec.  2,354.3| 66.9|  59.3|  Dec.  68.6
 New      |        |        |Jan.-          |     |      |Jan.-
  Zealand |   578.3|   644.2|  Dec.    457.8|  2.9|   2.3|  Dec.   1.9
          |        |        |Jan.-          |     |      |Jan.-
 Norway   |   877.3|   872.7|  Dec.    912.0| 29.4|  35.3|  Dec.  43.9
          |        |        |Jan.-          |     |      |Jan.-
 Pakistan |   519.9|   609.7|  Dec.    350.2| 24.6|   8.6|  Dec.   4.2
          |        |        |Jan.-          |     |      |Jan.-
 Portugal |   329.4|   346.6|  Dec.    330.6|  1.8|    .8|  Dec.    .9
          |        |        |Jan.-          |     |      |Jan.-
 Spain    |   387.0|   518.5|  Oct.    481.2|   .4|    .2|  Oct.  [9]
          |        |        |Jan.-          |     |      |Jan.-
 Sweden   | 1,775.2| 1,727.2|  Dec.  1,577.0|137.0| 108.4|  Dec.  61.4
 Switzer- |        |        |Jan.-          |     |      |Jan.-
  land    | 1,364.4| 1,205.9|  Dec.  1,182.8| 57.4|  45.4|  Dec.  50.7
          |        |        |Jan.-          |     |      |Jan.-
 Taiwan   |    85.8|   113.0|  Dec.    105.8|  6.8|   9.7|  Dec.   5.8
          |        |        |Jan.-          |     |      |Jan.-
 Turkey   |   402.0|   555.9|  Oct.    428.8| 20.0|  20.6|  Oct.  22.8
 United   |        |        |Jan.-          |     |      |Jan.-
  Kingdom |10,959.8| 9,748.2|  Dec.  9,365.7|287.8| 243.3|  Dec. 235.6
 United   |        |        |Jan.-          |     |      |Jan.-
  States  |10,967.4|10,716.8|  Dec. 10,873.7|110.3|  67.3|  Dec.  45.6
 ---------+--------+--------+---------------+-----+------+------------

 [8] January-September only.
 [9] Less than $50,000.

  NOTE.--Soviet Bloc countries are Albania, Bulgaria, Czechoslovakia,
Soviet Zone of Germany, Hungary, Poland, Rumania, U.S.S.R., Outer
Mongolia, and China (data as far as possible refer to Mainland China
including Manchuria and Inner Mongolia).

Source: Official trade statistics of listed countries, compiled by
U.S. Department of Commerce.


TABLE 4.--_Free-world exports to the Soviet bloc, monthly, 1952 and 1953_

            [In millions of U. S. dollars]
 --------------+-----------+-----------+----------+----------
               |           |           |          |
     Month     |   Total   |  European | U.S.S.R. |  China
               |Soviet bloc| Satellites|          |
 --------------+-----------+-----------+----------+----------
 1952:         |           |           |          |
   January     |     107.8 |      58.7 |     39.1 |     10.0
   February    |     121.4 |      51.3 |     48.9 |     21.2
   March       |     129.2 |      67.8 |     53.4 |      8.0
   April       |     114.8 |      53.1 |     40.7 |     21.0
   May         |     139.4 |      52.4 |     52.5 |     34.5
   June        |     109.4 |      56.1 |     30.7 |     22.6
   July        |     118.0 |      53.5 |     39.2 |     25.3
   August      |     125.4 |      53.2 |     39.3 |     32.9
   September   |      89.5 |      45.6 |     23.9 |     20.0
   October     |     104.6 |      50.4 |     34.6 |     19.6
   November    |     120.4 |      55.7 |     40.1 |     24.6
   December    |     139.3 |      72.5 |     38.0 |     28.8
 1953:         |           |           |          |
   January     |     119.3 |      54.9 |     25.9 |     38.5
   February    |      97.1 |      48.6 |     23.5 |     25.0
   March       |     123.9 |      61.2 |     33.3 |     29.4
   April       |     110.9 |      53.2 |     26.8 |     30.9
   May         |      88.4 |      43.4 |     25.8 |     19.2
   June        |     100.9 |      51.9 |     27.2 |     21.8
   July        |     104.4 |      55.2 |     30.7 |     18.5
   August      |     113.2 |      56.1 |     37.8 |     19.3
   September   |      90.3 |      47.7 |     30.0 |     12.6
   October     |     118.4 |      50.7 |     46.8 |     20.9
   November    |     140.3 |      67.0 |     50.6 |     22.5
   December    |     144.4 |      68.7 |     53.2 |     22.2
 --------------+-----------+-----------+----------+----------

  NOTE.--Monthly data are preliminary and unrevised. Therefore,
they will not add exactly to annual world totals. China data refer,
wherever possible, to Mainland (Communist) China, including
Manchuria and Inner Mongolia.

Source: Official trade statistics of the free world, compiled by
U. S. Department of Commerce.


TABLE 5.--_Free world imports from the Soviet bloc, monthly, 1952 and
  1953_

            [In millions of U. S. dollars]
 --------------+-----------+-----------+----------+-----------
               |           |           |          |
     Month     |   Total   |  European | U.S.S.R. |  China
               |Soviet bloc| Satellites|          |
 --------------+-----------+-----------+----------+-----------
 1952:         |           |           |          |
   January     |     153.8 |      76.0 |     43.7 |     34.1
   February    |     145.2 |      66.0 |     45.6 |     33.6
   March       |     138.5 |      68.0 |     44.5 |     26.0
   April       |     148.3 |      63.0 |     53.5 |     31.8
   May         |     133.4 |      60.6 |     47.3 |     25.5
   June        |     114.0 |      58.7 |     35.0 |     20.3
   July        |     125.0 |      66.9 |     28.7 |     29.4
   August      |     122.1 |      62.7 |     30.0 |     29.4
   September   |     120.6 |      56.7 |     31.9 |     32.0
   October     |     124.0 |      59.7 |     35.6 |     28.7
   November    |     135.3 |      65.2 |     35.7 |     34.4
   December    |     145.7 |      74.8 |     30.5 |     40.4
 1953:         |           |           |          |
   January     |     135.4 |      67.8 |     30.9 |     36.1
   February    |     103.2 |      51.3 |     16.8 |     34.3
   March       |     115.8 |      59.6 |     19.5 |     36.2
   April       |     139.9 |      74.3 |     24.2 |     40.2
   May         |     127.6 |      61.6 |     25.0 |     40.5
   June        |     132.0 |      63.3 |     29.3 |     39.2
   July        |     124.6 |      62.2 |     29.5 |     32.6
   August      |     135.3 |      58.4 |     44.9 |     30.5
   September   |     141.3 |      65.2 |     37.5 |     38.1
   October     |     147.2 |      71.5 |     40.8 |     33.7
   November    |     129.7 |      67.6 |     34.9 |     26.8
   December    |     146.2 |      63.7 |     44.3 |     37.3
 --------------+-----------+-----------+----------+-----------

NOTE.--Monthly data are preliminary and unrevised. Therefore, they
will not add exactly to annual world totals. China data refer,
wherever possible, to Mainland (Communist) China, including
Manchuria and Inner Mongolia. In 1952 United States statistics
included Outer Mongolia with China, where it is shown above.
In 1953 United States trade with Outer Mongolia was separately
available; it is therefore included in the total bloc column above,
but not with China. United States monthly 1953 imports from Outer
Mongolia were as follows in thousands of dollars: January, 647;
February, 800; March, 517; April 1,185; May, 474; June, 228;
July, 287; August, 1,492; September, 526; October, 1,243;
November, 357; December, 902.

Source: Official trade statistics of the free world, compiled by
U. S. Department of Commerce.


TABLE 6.--_Free-world exports to Communist China,
            semiannual, 1952 and 1953_

            [In millions of U. S. dollars]
 --------------+-----+-----+-----+--------+------------------------------
               |First|Second|First|Second |
 Country       | half| half| half|   half |   Major items in 1953
               | 1952| 1952| 1953|   1953 |
 --------------+-----+-----+-----+--------+------------------------------
 Free-world    |     |     |     |   [10] |
 exports, total|112.8|143.7|158.9|   111.1|
               +-----+-----+-----+--------+
 Hong Kong     | 29.1| 61.9| 63.7|    30.9|Medicine, dyestuffs,
               |     |     |     |        | fertilizers, machinery.
 Ceylon        | 12.5| 13.5| 25.0|    25.9|Rubber, coconut oil.
 West Germany  |   .2|  2.6| 13.7|    11.3|Iron and steel,
               |     |     |     |        | scientific instruments,
               |     |     |     |        | electrical machinery.
 United        |     |     |     |        |
   Kingdom     |  1.9| 10.9|  8.7|     8.8|Wool tops, mechanical handling
               |     |     |     |        | equipment, sodium compounds,
               |     |     |     |        | piece goods, ammonium
               |     |     |     |        | sulphate, textile machinery.
 Egypt         |  2.5|  6.4|  4.9|     5.5|Cotton.
 Switzerland   |  2.5|  3.5| 10.0|     5.5|Watches, coal tar dyes, indigo.
 Finland       |   .1|  6.5|  1.0|     4.4|Paper, cellulose,
               |     |     |     |        | copper semi-manufactures.
 Australia     |   .2|   .4|  1.4|     3.9|Greasy wool, wool tops.
 Pakistan      | 54.5| 29.4|  3.6|     3.7|Cotton.
 France        |   .9|  2.4|  9.7|     2.7|Iron and steel, machine tools,
               |     |     |     |        | chemicals and pharmaceuticals.
 Japan         |   .3|   .2|  2.3|     2.2|Textile machinery, seaweed,
               |     |     |     |        |  superphosphates, medicines.
 Netherlands   | [13]| [13]|  2.6|     1.3|Ammonium sulphate.
 Italy         |  2.1|  1.5|  3.9|      .8|Chemical fertilizer, artificial
               |     |     |     |        |  yarn, woolen blankets.
 Sweden        |   .2|   .4|  2.3|      .4|Paper and paper manufactures.
 India         |  5.2|  1.3|  2.2| [11] .2|Jute bags.
 Belgium-      |     |     |     |        |
  Luxembourg   |   .3|   .3|  1.3|      .1|Ammonium sulphate and
               |     |     |     |        |   sulfonitrate.
 Norway        | [13]|  1.7|   .9|  [13]  |Paper.
 Other         |   .3|   .8|  1.7|  [12]  |
 --------------+-----+-----+-----+--------+-------------------------------

 [10] Estimate.
 [11] July-November only.
 [12] Not available.
 [13] Less than $50,000.

  NOTE.--Totals and Swiss data are adjusted to exclude those watches
known to be destined for Hong Kong and Malaya. So far as possible, data
refer to Mainland (Communist) China, including Manchuria and Inner
Mongolia.

Source: Official trade statistics of free-world countries, compiled by
U. S. Department of Commerce.


TABLE 7.--_Free-world imports from Communist China, semiannual, 1952
and 1953_

            [In millions of U. S. dollars]
 --------------+-----+------+-----+------+-------------------------------
               |First|Second|First|Second|
   Country     | half| half| half | half |   Major items in 1953
               | 1952| 1952| 1953 | 1953 |
 --------------+-----+-----+------+------+-------------------------------
 Free world    |     |     |      | [14] |
 imports, total|171.2|194.6| 226.6| 198.4|
               |-----+-----+------+------|
 Hong Kong     | 60.7| 84.6|  84.9|  65.1|Fruits and vegetables,
               |     |     |      |      | textiles,vegetable, pigs and
               |     |     |      |      | poultry, eggs,plants
               |     |     |      |      | and seeds.
 Ceylon        |   .3|  6.6|  22.1|  21.8|Rice.
 West Germany  |  8.2|  9.4|  14.8|  18.5|Oilseeds, vegetable oils, eggs.
 Japan         |  5.6|  9.3|  12.6|  17.1|Oilseeds, cashmere, wool, raw
               |     |     |      |      | silk, pulses.
 United Kingdom|  5.0|  3.4|  12.0|  16.8|Eggs, hair, oilseeds.
 Malaya        | 21.0| 18.5|  20.3|  14.1|Fruits and vegetable, eggs,
               |     |     |      |      | plants and seeds, paper and
               |     |     |      |      | manufactures, animal feeding
               |     |     |      |      | stuffs.
 Switzerland   | 3.5 |  6.4|   8.1|   8.0|Oilseeds, raw silk,
               |     |     |      |      | silk fabrics.
 France        |  3.1|  2.5|   5.2|   5.8|Textile yarn and fibers,
               |     |     |      |      | grains, bristles, casings,
               |     |     |      |      | essential oils.
 Netherlands   |  2.8|  2.1|  11.8|   3.4|Oilseeds.
 Belgium-      |     |     |      |      |
   Luxembourg  |  2.5|  2.2|   4.2|   3.1|Oilseeds, vegetable oils.
 Italy         |   .9|  1.2|   4.3|   3.1|Fats and oils, oilseeds.
 Taiwan        |  4.5|  5.2|   2.9|   2.8|Pulses, medicinal substances,
               |     |     |      |      | vegetables.
 Norway        |  1.0|  2.2|    .8|   2.8|Oilseeds, copra, tung oil.
 French        |     |     |      |      |
   Morocco     |  4.0|  1.5|   4.7|   2.5|Green tea.
 Australia     |  2.3|  1.2|   1.9|   2.4|Inedible animal products, oils,
               |     |     |      |      | peanuts.
 Pakistan      |  1.4|  1.2|    .8|   2.2|Cotton twist and yarn.
 Indonesia     |   .9|  1.0|    .7|   1.5|Vegetables, plants and seeds,
                                           resin.
 United States | 22.6|  5.1|    .2|    .4|Feathers, bristles, furskins,
               |     |     |      |      | art works and antiques.
 Canada        |  1.1|   .2|    .7|    .4|Walnuts and peanuts.
 Philippines   |  1.4|  1.8|   1.3|[15].4|Food, cotton and
               |     |     |      |      |     manufactures, coffee.
 India         | 10.2| 22.2|   1.4|[15].4|Rice.
 Denmark       | [16]| [16]|   2.1|(none)|Oilseeds, feedstuffs.
 Indochina     |  3.3| 4.0|[17]3.4| [18] |Not available.
 Burma         |  2.2|   .2|    .2| [18] |Garlic, raw silk and yarn,
               |     |     |      |      | cotton yarn.
 Other         |  2.7|  2.6|   5.2| [18] |
 --------------+-----+-----+------+------+-------------------------------

 [14] Estimate.
 [15] Figures for the second half of 1953 are incomplete as follows:
 Philippines, July-November: India, July-November.
 [16] Less than $50,000.
 [17] January-May only.
 [18] Not available.

  NOTE.--So far as possible, data refer to Mainland Communist China,
including Manchuria and Inner Mongolia.

Source: Official trade statistics of free world countries, compiled by
U. S. Department of commerce.


TABLE 8.--_United States trade with the Soviet-bloc countries, 1937,
1948, 1952, and 1953_

                              [In thousands of dollars]
 -------------+----------------------------+------------------------------
              |Exports, including reexports|       General imports
  Country     |-------+--------+-----+-----+-------+--------+------+------
              |  [19] |        |     |     |       |        |      |
              |  1937 |  1948  | 1952| 1953|  1937 |  1948  | 1952 | 1953
 -------------+-------+--------+-----+-----+-------+--------+------+------
 Total Soviet |       |        |     |     |       |        |      |
   bloc       |143,892| 396,641|1,097|1,776|206,506| 233,482|67,311|45,597
              |=======+========+=====+=====+=======+========+======+======
 Bloc in      |       |        |     |     |       |        |      |
   Europe     |94,189 | 123,241|1,097|1,776|102,884| 113,138|39,586|36,325
              |-------+--------+-----+-----+-------+--------+------+------
 Albania      |   147 |     344|    1|    2|    137|--------|    52|    65
 Bulgaria     |   490 |   2,086|   24|    5|  1,862|     831|   275|   358
 Czecho-      |       |        |     |     |       |        |      |
   slovakia   |13,233 |  21,563|   75|   40| 37,183|  22,125| 1,477| 2,262
 East Germany | n.s.s.| n.s.s. |  622|1,079| n.s.s.|  n.s.s.| 7,118| 6,465
 Estonia      | 1,244 |       7|-----| ----|    937|     (X)|------|------
 Hungary      |   693 |   8,029|   69|    2|  5,512|   1,613| 2,913| 1,717
 Latvia       | 1,744 |       1|-----|-----|    767|       6|------|------
 Lithuania    |   511 |     115|-----|-----|  1,172|      10|     1|------
 Poland and   |26,297 |  55,675|  286|  622| 19,568|   1,249|10,247|14,295
   Danzig     |       |        |     |     |       |        |      |
 Rumania      | 6,938 |   7,542|-----|    7|  4,978|     480|   683|   372
 U.S.S.R.     |42,892 |  27,879|   20|   19| 30,768|  86,825|16,818|10,791
              |=======+========+=====+=====+=======+========+======+======
 BLOC IN ASIA |       |        |     |     |       |        |      |
              |       |        |     |     |       |        |      |
 China  |}    |}      |        |     |     |       |       {|      |
  (including  |}      |        |     |     |       |       {| [20] |  [21]
  Manchuria)  |}49,703| 273,400|-----|-----|103,622|120,343{|24,605|   614
 Outer        |       |        |     |     |       |       {|
  Mongolia[23]|}      |        |     |     |       |       {| 3,120| 8,658
 North Korea  | n.s.s.| n.s.s. |-----|-----| n.s.s.| n.s.s. |------|------
 -------------+-------+--------+-----+-----+-------+--------+------+------

 [19] Data represent direct shipments only, which in prewar years greatly
 understated the trade with central European countries; for a total of
 direct and indirect imports of United States merchandise see foreign
 country statistics.
 [20] Consisted chiefly of strategic materials specifically licensed for
 import.
 [21] Consisted chiefly of strategic materials specifically licensed
 for import in 1952 but not actually imported until 1953, and Chinese
 material located in free countries before 1950 and purchased in those
 countries by Americans.
 [22] United States does not consider Outer Mongolia as a part of
 Communist China; traditionally for statistical purposes Outer Mongolia
 has been included with China; separate figures for this area have been
 compiled by Census only since January 1953. The 1952 breakdown is
 estimated.

 (X) Less than $500.
 n.s.s. Not shown separately.
 Source: U. S. Department of Commerce.
 Rows of dashes: )----) mean nothing shipped.



APPENDIX C

Text of the Battle Act


=Mutual Defense Assistance Control Act of 1951 [H. R. 4550], Public Law
213, 82d Congress, 65 Stat. 644, Approved October 26, 1951=

     An ACT To provide for the control by the United States and
     cooperating foreign nations of exports to any nation or
     combination of nations threatening the security of the United
     States, including the Union of Soviet Socialist Republics and all
     countries under its domination, and for other purposes

_Be it enacted by the Senate and House of Representatives of the United
States of America in Congress assembled_, That this Act may be cited as
the "Mutual Defense Assistance Control Act of 1951."


TITLE I--WAR MATERIALS

SEC. 101. The Congress of the United States, recognizing that in a
world threatened by aggression the United States can best preserve and
maintain peace by developing maximum national strength and by utilizing
all of its resources in cooperation with other free nations, hereby
declares it to be the policy of the United States to apply an embargo
on the shipment of arms, ammunition, and implements of war, atomic
energy materials, petroleum, transportation materials of strategic
value, and items of primary strategic significance used in the
production of arms, ammunition, and implements of war to any nation or
combination of nations threatening the security of the United States,
including the Union of Soviet Socialist Republics and all countries
under its domination, in order to (1) increase the national strength
of the United States and of the cooperating nations; (2) impede the
ability of nations threatening the security of the United States to
conduct military operations; and (3) to assist the people of the
nations under the domination of foreign aggressors to reestablish their
freedom.

It is further declared to be the policy of the United States that no
military, economic, or financial assistance shall be supplied to any
nation unless it applies an embargo on such shipments to any nation or
combination of nations threatening the security of the United States,
including the Union of Soviet Socialist Republics and all countries
under its domination.

This Act shall be administered in such a way as to bring about the
fullest support for any resolution of the General Assembly of the
United Nations, supported by the United States, to prevent the shipment
of certain commodities to areas under the control of governments
engaged in hostilities in defiance of the United Nations.

SEC. 102. Responsibility for giving effect to the purposes of this Act
shall be vested in the person occupying the senior position authorized
by subsection (e) of section 406 of the Mutual Defense Assistance Act
of 1949, as amended, or in any person who may hereafter be charged with
principal responsibility for the administration of the provisions of
the Mutual Defense Assistance Act of 1949. Such person is hereinafter
referred to as the "Administrator".

SEC. 103. (a) The Administrator is hereby authorized and directed to
determine within thirty days after enactment of this Act after full
and complete consideration of the views of the Departments of State,
Defense, and Commerce; the Economic Cooperation Administration; and
any other appropriate agencies, and notwithstanding the provisions of
any other law, which items are, for the purpose of this Act, arms,
ammunition, and implements of war, atomic energy materials, petroleum,
transportation materials of strategic value, and those items of primary
strategic significance used in the production of arms, ammunition, and
implements of war which should be embargoed to effectuate the purposes
of this Act: _Provided_, That such determinations shall be continuously
adjusted to current conditions on the basis of investigation and
consultation, and that all nations receiving United States military,
economic, or financial assistance shall be kept informed of such
determinations.

(b) All military, economic, or financial assistance to any nation
shall, upon the recommendation of the Administrator, be terminated
forthwith if such nation after sixty days from the date of a
determination under section 103 (a) knowingly permits the shipment to
any nation or combination of nations threatening the security of the
United States, including the Union of Soviet Socialist Republics and
all countries under its domination, of any item which he has determined
under section 103 (a) after a full and complete investigation to be
included in any of the following categories: Arms, ammunition, and
implements of war, atomic energy materials, petroleum, transportation
materials of strategic value, and items of primary strategic
significance used in the production of arms, ammunition, and implements
of war: _Provided_, That the President after receiving the advice of
the Administrator and after taking into account the contribution of
such country to the mutual security of the free world, the importance
of such assistance to the security of the United States, the strategic
importance of imports received from countries of the Soviet bloc, and
the adequacy of such country's controls over the export to the Soviet
bloc of items of strategic importance, may direct the continuance of
such assistance to a country which permits shipments of items other
than arms, ammunition, implements of war, and atomic energy materials
when unusual circumstances indicate that the cessation of aid would
clearly be detrimental to the security of the United States: _Provided
further_, That the President shall immediately report any determination
made pursuant to the first proviso of this section with reasons
therefor to the Appropriations and Armed Services Committees of the
Senate and of the House of Representatives, the Committee on Foreign
Relations of the Senate, and the Committee on Foreign Affairs of the
House of Representatives, and the President shall at least once each
quarter review all determinations made previously and shall report his
conclusions to the foregoing committees of the House and Senate, which
reports shall contain an analysis of the trade with the Soviet bloc of
countries for which determinations have been made.

SEC. 104. Whenever military, economic, or financial assistance has been
terminated as provided in this Act, such assistance can be resumed
only upon determination by the President that adequate measures have
been taken by the nation concerned to assure full compliance with the
provisions of this Act.

SEC. 105. For the purposes of this Act the term "assistance" does not
include activities carried on for the purpose of facilitating the
procurement of materials in which the United States is deficient.


TITLE II--OTHER MATERIALS

SEC. 201. The Congress of the United States further declares it to be
the policy of the United States to regulate the export of commodities
other than those specified in title I of this Act to any nation or
combination of nations threatening the security of the United States,
including the Union of Soviet Socialist Republics and all countries
under its domination, in order to strengthen the United States and
other cooperating nations of the free world and to oppose and offset
by nonmilitary action acts which threaten the security of the United
States and the peace of the world.

SEC. 202. The United States shall negotiate with any country receiving
military, economic, or financial assistance arrangements for the
recipient country to undertake a program for controlling exports of
items not subject to embargo under title I of this Act, but which in
the judgment of the Administrator should be controlled to any nation or
combination of nations threatening the security of the United States,
including the Union of Soviet Socialist Republics and all countries
under its domination.

SEC. 203. All military, economic, and financial assistance shall be
terminated when the President determines that the recipient country
(1) is not effectively cooperating with the United States pursuant
to this title, or (2) is failing to furnish to the United States
information sufficient for the President to determine that the
recipient country is effectively cooperating with the United States.


TITLE III--GENERAL PROVISIONS

SEC. 301. All other nations (those not receiving United States
military, economic, or financial assistance) shall be invited by the
President to cooperate jointly in a group or groups or on an individual
basis in controlling the export of the commodities referred to in title
I and title II of this Act to any nation or combination of nations
threatening the security of the United States, including the Union of
Soviet Socialist Republics and all countries under its domination.

SEC. 302. The Administrator with regard to all titles of this Act
shall--

       (a) coordinate those activities of the various United States
     departments and agencies which are concerned with security
     controls over exports from other countries;
       (b) make a continuing study of the administration of export
     control measures undertaken by foreign governments in accordance
     with the provisions of this Act, and shall report to the Congress
     from time to time but not less than once every six months
     recommending action where appropriate; and
       (c) make available technical advice and assistance on export
     control procedures to any nation desiring such cooperation.

SEC. 303. The provisions of subsection (a) of section 403, of section
404, and of subsections (c) and (d) of section 406 of the Mutual
Defense Assistance Act of 1949 (Public Law 329, Eighty-first Congress)
as amended, insofar as they are consistent with this Act, shall be
applicable to this Act. Funds made available for the Mutual Defense
Assistance Act of 1949, as amended, shall be available for carrying out
this Act in such amounts as the President shall direct.

SEC. 304. In every recipient country where local currency is made
available for local currency expenses of the United States in
connection with assistance furnished by the United States, the local
currency administrative and operating expenses incurred in the
administration of this Act shall be charged to such local currency
funds to the extent available.

SEC. 305. Subsection (d) of section 117 of the Foreign Assistance
Act of 1948 (Public Law 472, Eightieth Congress), as amended, and
subsection (a) of section 1302 of the Third Supplemental Appropriation
Act, 1951 (Public Law 45, Eighty-second Congress), are repealed.

U. S. GOVERNMENT PRINTING OFFICE: 1954



TRANSCRIBER'S NOTE:


Several words were changed as they were deemed to be typographic errors:
  p.32 esspecially changed to especially
  p.70 comodities changed to commodities
  p.71 Handelsgenchmigung changed to Handelsgenehmigung
  p.81 naptha changed to naphtha

Otherwise, every effort has been made to remain true to the authors'
words and intent. Words such as sizeable and intransigeance are
unchanged on the assumption that they were the author's intent.





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