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    "title": "National Security Council Progress Report by the Secretary of State and Director for Mutual Security on the Implementation of United States Policies and Programs in the Economic Field Which May Affect the War Potential of the Soviet Bloc (NSC 104/2)",
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    "ocrText": "NATIONAL ARCHIVES AND RECORDS SERVICE\nWITHDRAWAL SHEET (PRESIDENTIAL LIBRARIES)\nFORM OF\nDOCUMENT\nCORRESPONDENTS OR TITLE\nDATE\nRESTRICTION\nDeclasafiel 10-28-86\nReport\nN.S.C. Progress Report on NSC 115 re the Defense\nof Europe and the German Contribution\n9-9-52\nA\nSANITIZED MLT F1-16\nReport\nN.S.C. Progress Report on NSC 104/2 re the Soviet Bloc 9-22-52\nA\nReport\nN.S.C. Progress Report on NSC 29 re Industrial\nOperations in Foreign Countries Sanitized Sanit 10-18-83\n10-3-52\nA\nsanited 1-2014\nReport\nN.S.C. Progress Report on NSC 56/2 re Inter-American\nMilitary Collaboration\n10-14-52\nA\ndeclaration 5-22-85\nReport\nC.I.A. Report re Iran (SE-33)\n10-14-52\nA\nDelans. 6-K-93\nReport\nTo the N.S no the Angle-Iranian Problem (NSC 117)\n10-18-51\nDECLASTIFIED\n4-17-79\nReport\nTo the N.S.C. re Iran (NSC 136) SANITIZED NLT 81-9\n11-6-52\nA\nReport\nC.I.A. Report re Iran (NIE ME 75) desking 6-K-93 11-13-52\nA\nReport\nN.S.C. Status of Projects as of 11-14-52 Reclased fed 1-2014\nA\nMomo\nFor (attachment) the N.S.C. from James S. Lay, Jr. re Iran DECLANTIFIED 7.20.22\n11-18-52\nA\nMemo\nFor (attachment) the N.S.C. from James S. Lay, Jr. re Iran DEC\nLASSIFIED\n11-19-52\n11-19-52\nA\nAgenda\nFor the N.S.C. Meeting 11-19-52\nDECLARIFIED\n11-14-52\nA\nMinutes\nOf the N.S.C. Meeting 11-19-52\n4-28-13\nA\nMemo\nFor the President from James S. lay, Jr. re Iran\n11-20-52\n52\nDECLARAMPIED\nMemo\nFor the N.S.C. from James S. Lay, Jr. re Iran\n7-20-12\n(attached NSC 136/1) SANITIZED NLT fing\n11-20-52\nA\nSanitized 1-2014\nFILE LOCATION\nTRUMAN PAPERS - P.S.F. - SUBJECT FIIE\nN.S.C. - MEETINGS\nFOLDER: MEETING NO. 125\n11-19-52\n[Pax 219]\nRESTRICTION CODES\n(A) Closed by Executive Order 11652 governing access to national security information.\n(B) Closed by statute or by the agency which originated the document.\n(C) Closed in accordance with restrictions contained in the donor's deed of gift.\nGENERAL SERVICES ADMINISTRATION\nGSA DC 73.495\nGSA FORM 7122 (7.72)\nSEGRET\nSECURITY INFORMATION\nCOPY NO. 1\nNATIONAL SECURITY COUNCIL\nPROGRESS REPORT\nby\nTHE SECRETARY OF STATE\nand\nTHE DIRECTOR FOR MUTUAL SECURITY\non the implementation of\nU. S. POLICIES AND PROGRAMS IN THE ECONOMIC FIELD WHICH\nMAY AFFECT THE WAR POTENTIAL OF THE SOVIET BLOC\nMART of ARCHIVES AND RL068DS THOMAN\n(NSC 104/2)\n8.5. SERVICE\" GOVERNMENT\nSeptember 22, 1952\nSANITIZED COPY\nnsc\nLTR.\n3\n10-12-83\nSECRET\nSECURITY INFORMATION\nSECRET\nCOPY\nSECURITY INFORMATION\nSeptember 22, 1952\nMEMORANDUM FOR MR. JAMES S. LAY, JR.,\nEXECUTIVE SECRETARY, NATIONAL SECURITY COUNCIL\nSubject: Fifth Progress Report on NSC 104/2, \"U. S.\nPolicies and Programs in the Economic Field\nWhich May Affect the War Potential of the\nSoviet Bloc\"\nReferences: A. NSC 104/2\nB. Memorandum for NSC from Executive Secretary,\n\"Assignment of Responsibilities for\nEconomic Defense, dated November 7, 1951,\ntransmitting Memorandum by the President on\nthis subject.\nC. Memorandum for NSC from Executive Secretary,\n\"Assignment of Responsibilities for\nEconomic Defense,' dated January 25, 1952\ntransmitting Memorandum of Agreement between\nthe Secretary of State and the Administrator\nof the Mutual Defense Assistance Control Act.\nIn accordance with the President's directive\non the assignment of responsibilities for\neconomic defense under NSC 104/2 and the memo-\nrandum of agreement between the Secretary of\nState and the Administrator of the Mutual Defense\nAssistance Control Act, there is submitted here-\nwith the fifth progress report on NSC 104/2.\nIt is requested that this be circulated to the\nmembers of the Council for their information.\n/s/ Dean Acheson\n/s/ W. A. Harriman\nSecretary of State\nDirector for Mutual Security\nAREYA ARCHIVES \"NATIONAL RECORDS TROMAN AND LIBRARY\n8.5.\nSERVICE\"\nGOVERNMENT\n- 1 -\nSECRET\nSECRET\nSECURITY INFORMATION\nFIFTH PROGRESS REPORT ON NSC 104/2\n(March 1 - July 1, 1952)\nCONTENTS\nPage\nSUMMARY\n1\nBATTLE ACT\n3\nTitle I Activities\n3\nTitle II Activities\n5\nTitle III Activities\n7\nIMPLEMENTATION OF NSC 91/1\n8\nJAPANESE EXPORT CONTROLS\n9\nCONTROLS OVER TRANSIT TRADE AND TRANSSHIPMENTS\n11\nImport Certificate and Delivery Verfi-\ncation System\n11\nBelgian Proposal\n11\nSHIPPING CONTROLS\n12\nDECREASING RELIANCE ON TRADE WITH THE SOVIET\nBLOC\n13\nINTERNATIONAL BLACK LIST\n15\nPRECLUSIVE BUYING\n16\nBERLIN ECONOMIC COUNTERMEASURES\n17\nUNITED STATES FINANCIAL AND IMPORT CONTROLS\n17\nForeign Assets Control Regulations\n17\nDollar Earnings of European Soviet Bloc\n18\nTHE MOSCOW ECONOMIC CONFERENCE\n19\nINTELLIGENCE FOR ECONOMIC DEFENSE\n20\nAPPENDIX: Problems of the Import Certificate and\nDelivery Verification System and other\nTransit Trade Problems.\nBARRY s ARDHIVES NATIONAL REGORDS TRUMAN AND LIMITY\nU.S.\nSERVICE\"\n- 11 -\nSECRET\nSOVERNMENT\nSECRET\nSECURITY INFORMATION\nMEMORANDUM FOR MR. JAMES S. LAY, JR.,\nEXECUTIVE SECRETARY, NATIONAL SECURITY COUNCIL\nSubject:\nFifth Progress Report on NSC 104/2\n\"United States Policies and Programs in the\nEconomic Field Which May Affect the War Potential\nof the Soviet Bloc\"\nNSC 104/2 was approved as Governmental policy on April 12,\n1951. It is requested that this report (covering the period\nfrom March 1 to July 1, 1952) be circulated to the members of\nthe Council for their information.\nSUMMARY\nDuring the four-month period ending July 1, 1952, a great\ndeal of effort was devoted to stock-taking for formulating and\ndeveloping the basis for new programs in the economic defense\nfield. Some of the economic security issues outstanding\nbetween the United States and its Western European Allies were\nsharpened to the extent that efforts began to be focused on\nresolving these issues, and, hopefully, paving the way for\ntheir solution. At the same time a number of substantial steps\nwere taken both in the Executive Branch and abroad in this field.\nTRUMAH\nAMOVN\nNATIONAL\nARCHIVES AND\nLIBRARY\nRECORDS\nU.S. SERVICE\" GOVERNMENT\nThe subsequent Senate vote of 59-11 favoring passage of\nthe Conference Report eliminating the Kem Amendment may not\nhave reflected the true attitude of the Congress on the problem\nof security trade controls. There was every indication during\nthe debate on the Conference Report that the Kem Amendment\nwould have been passed in the Senate had it been able to vote\non this issue alone.\nProgress in obtaining international agreement in other\nareas of the economic defense program was not generally note-\nworthy. Nothing was accomplished in the field of shipping\ncontrols, particularly as regards multilateral measures di-\nrected at Communist China. Although no real multilateral\nprogress was made towards closing the loopholes offered by the\ntransit facilities in various countries of continental Europe,\nthe problem has been under intensive study, and several de-\nvelopments occurred which may result in some remedial action\nin the period ahead. The Moscow Economic Conference proved\nworrisome, particularly from the standpoint of Soviet propa-\nganda gains in under-developed areas and the arousing of\nmutual suspicions among business interests in various of the\ncountries participating in COCOM.\nSome hopeful signs were evident in Scandinavian successes\nin obtaining Polish coal at lower prices and without having to\nyield strategic goods to the same extent as formerly. How much\nof this success can be attributed to the hardened bargaining\npositions of these countries, buttressed by concrete United\nStates support in the case of Denmark, and how much can be\ncredited to the past mild winter are difficult to determine.\nAs anticipated, Japanese pressures for relaxing restrictions\nover trade with Communist China continued to grow after the\neffective date of the peace treaty on April 28. The need for\nJapanese membership in a multilateral security trade control\nbody became more immediate thereafter, and the question of the\nprecise form of such membership became a matter of differences\nnot only within the United States Government, but also among\nthe United States, Canada, the United Kingdom, and France:\nBARRY ARCHIVES AND TABMAN RECORDS LIMITY\nA great deal of effort was devoted to organizational\naspects of the economic defense program within the United\n8.5.\n- 2 -\nSECRET\nSECRET\nSECURITY INFORMATION\nStates Government. United States representatives abroad have\nbeen given a substantial volume of background and policy\ninformation on the economic defense programs for the purpose\nof developing a distinct program approach to the East-West\ntrade problem. A positive result of this effort has been\nsome excellent reporting by field missions, This can be sus-\ntained and extended only by means of an adequate appraisal\nprogram, which it has not yet been possible to institute\nbecause of personnel limitations. Along this same line action\nhas been taken to organize available United States personnel\nabroad in an effective manner to deal with Battle Act and re-\nlated economic defense program matters.\nAn undesirable, but perhaps unavoidable, development has\nbeen the demands placed by EDAC committees and working groups\non the limited staffs in the agencies charged with carrying\nout the programs and policies of NSC 104/2 and the Battle Act.\nProvisions have been made for additional staff assistance in\nseveral agencies, however, and the intensified and fully co-\nordinated development of economic defense programs and acti-\nvities has resulted in an operation which is more closely\nintegrated within the Executive Branch than has previously\nbeen the case.\nBATTLE ACT\nDuring the period from March 1 to July 1, there was a\nconsiderable acceleration in the pace of activity under the\nBattle Act. Because of the urgency of the questions involved,\nmost particularly those concerned with exceptions, major at-\ntention was directed to problems which arose under Title I of\nthe Act. However, some progress has also been made in imple-\nmenting Titles II and III of the Act.\nTHUMAN\nHave\nARGHIVESALD\nLIBRARY\n8.5.\nRESORDS service\"\nARCHIVES \"NATIONAL ABOBRDS THUMAN AND LIBRATY\nSERVICE\" GOVERNMENT\n- 4 -\nSECRET\n/\nHART ARCHIVES \"NATIONAL REGGROS TRUMAN AND TIMETY\n: - SERVICE\" #OVERNMENT\n- 5 -\nSECRET\nSECRET\nSECURITY INFORMATION\nthe future work under the Battle Act will be done.\nAfter considerable study, preliminary steps have been\ntaken to develop a Title II export control program on a\ncommodity and country basis. A survey of each item on the\nUnited States strategic control lists is being made with the\naim of determining for each commodity on a technical basis\n(a) the amount which might be exported to the Soviet bloc\nwithout endangering the security objectives of the free world,\nand (b) whether there is a problem country (or countries)\nwith which the United States should negotiate to reduce the\namount of the particular commodity exported by that country\nto the bloc. This survey is being made by some twenty-six\ntechnical task groups centered in the Office of International\nTrade.\nThe Title II Working Group, established early in February\nunder the EDAC, will review the findings of the technical task\ngroups together with the data assembled by geographical area\ntask groups. The latter groups are to develop the other\nfactors to be considered in determining a level of trade in\nInternational List II and other strategic items to be nego-\ntiated with particular countries. The recommendations of the\nTitle II Working Group will ultimately be reviewed on a more\nformal interagency basis, after which the United States will\nattempt to negotiate the levels of trade determined as being\nappropriate under Title II.\nThis survey 1s a formidable task which will take at least\nfour months to complete. It will take into account the polit-\nical and economic as well as the strategic factors involved,\nand cover all free world countries, not only the Western\nEuropean.\nMeanwhile, a review of the main accomplishments of the\nInternational List II negotiations shows on balance that sub-\nstantial results have been obtained thus far. First, a more\nprecise and effective structure has been established for the\noperation of quantitative controls. Secondly, specific maximum\nquotas have been fixed for 64 of the 88 items included in\nInternational List II; while certain of the quota limits (which\ntotal 27 million dollars) are not viewed by the United States\nas fully defensible on strategic grounds, they are generally\nTRUMAN\ndefensible as the best obtainable from the recently concluded\nANNYN\nMATIONAL\nARCHIVES AND\nBEGORDS\nLIDRARY\nnegotiations. Third, quid pro quo controls have been estab-\nlished for 24 items (of which 5 are subject to modified\n0.5.\nSERVICE\"\nGOVERNMENT\nquid pro quo control) for which defensible quotas could not be\nagreed upon or where the quota approach was impractical.\nNotwithstanding these accomplishments, it appears possible\nthat List II exports in 1952 might exceed those reported for\n- 6 -\nSECRET\nSECRET\nSECURITY INFORMATION\n1951. There are, however, serious shortcomings in attempting\nto evaluate progress in the quantitative control field through\na simple statistical approach. Apart from technical difficul-\nties, it might be tactically unwise to measure such progress by\npicturing steadily declining List II exports. One reason is\nthat such a picture would lead to the expectation of further\ndecreases in total value. This might not occur, even though\nthe strategic significance of the quantities exported were\nreduced as a whole. Second, the logical extension of a pro-\ngressively declining level of such exports is zero. This\nimplication would make it difficult to convince other partic-\nipating countries that the United States' approach is still\nselective. Finally, to compare total value figures for dif-\nferent periods may be misleading as an index to progress\nbecause the totals (assuming ad justments for price increases)\nare heavily affected by high value items such as ships. It\ndoes not follow that a 2-million dollar vessel is four times\nmore important from the strategic viewpoint than 500,000\ndollars worth of bearings.\nTitle III Activities\nTRUMAN\nAmoun\nAMD\nARTIST\n1.5.\nv\nservice\"\nGOVERNMENT\n- 7 -\nSECRET\nSECRET\nSECURITY INFORMATION\nIMPLEMENTATION OF NSC 91/1\nAgreement has been reached within the United States\nGovernment which will enable the Department of Commerce to\nfollow the provisions of NSC 91/1, particularly with respect\nto International List II and United States List II-B commodities,\nwith a minimum of inconsistency with control programs to be\ndeveloped for Title II commodities under the Battle Act. On\nJune 16 the Secretary of Commerce directed. the issuance of\nDepartment of Commerce Program Determination No. 810*, which\naccomplishes the following:\n(1) Extends the security export control program to all\nfriendly foreign countries in addition to COCOM\ncountries, Sweden and Switzerland;\n(2) covers items on United States Lists II and II-B, as\nwell as those on Lists I and I-A;\n(3) establishes the framework for treatment of capital\nequipment and production materials of both embargo\nand quantitative control classifications;\n(4) clarifies the practice and methods of obtaining\ninformation and assurances;\n(5) provides coordination with Battle Act activities;\n(6) codifies all outstanding program determinations and\nnotices of action on the subject; and\nARGHIVES AND RECORDS TRUMAN LIBERTY\n(7) permits a flexible and selective approach to the\nOF SERVICE\nproblem, particularly for United States List II and\nII-B items and capital equipment.\nUnder these arrangements, unless a country exceeds agreed\nTitle II (or COCOM) export quotas, United States export\n* See Progress Report dated June 16, 1952 by the Secretary of\nCommerce on NSC 91/1, \"East-West Trade\", as amended by NSC\nNSC 104/2\n- 8 -\nSECRET\nSECRET\nSECURITY INFORMATION\nlicenses for identical items shall generally be granted.\nSpecific problem cases, involving, for example, an important\ncontribution by the United States to the ability of a country\nto fill its agreed quota, will be brought to the attention of\nthe appropriate agencies and be dealt with by the Department\nof Commerce in the light of the general security interest of\nthe United States.\nBARRY E.S. , ARCHIVES NATIONAL SERVICE\" RECORDS SEVER WEAT THOMAH AND\nARCHIVES NATIONAL RECORDS TRUMAN AND\nat ENVERNMENT\n- 10 -\nSECRET\nARIVE : ARORIVES \"NATIONAL SERVICE\" REGORDS TRUMAN AND 1\nHAIRY ARCHIVES \"NATIONAL REGORDS TROMAN AND\n: GOVERNMENT\nSERVICE\"\n- 12 -\nSECRET\nBARRY D.S. , ARCHIVES \"NATIONAL RECORDS SERVICE\" GOVERN WENT TRUMAN AND LIBERTY\nDECREASING RELIANCE ON TRADE WITH THE SOVIET BLOC\nIn the four-month period ended July 1, 1952 the MSA sub-\nstantially completed its series of studies on important\ncommodities in East-West trade, issuing papers on chrome,\nmanganese, tin and tungsten, and fish and fish products. Thus\na rather comprehensive factual basis has been established for\nfurther work towards developing action programs to strengthen\nthe bargaining position of friendly nations as against the\nSoviet bloc.\n- 13 -\nSECRET\nSECRET\nSECURITY INFORMATION\nThis work has been given a start, albeit a slow one,\nthrough the mechanism of an interagency Studies Coordination\nWorking Group established early in May under the EDAC structure.\n(Three meetings of the Group were held in May, but none in\nJune because of the pressure of several of the members' work\non the Berlin Economic Countermeasures Group. See page 17for\nan outline report on the work of this latter group.)\nThe Studies Coordination Working Group began its acti-\nvities by considering in detail the situations of a number of\nWestern European countries whose reliance on East-West trade\nappears to be significant. Such reliance was, from the Group's\nstandpoint, agreed to be mainly a function of economic and\nsecurity factors. In the light of these factors the Group\nturned to a consideration of the most effective means through\nwhich a lessening of the West's dependence on the bloc could\nbe achieved practically. Exploration was initiated of the\npossibility of (1) increasing production in the free world of\nthe main imports received from the Soviet bloc; of (2)\nsystematically coordinating Western European countries' trade\nnegotiations with the bloc countries, thereby minimizing--or\nextracting the greatest net advantage from-the inclusion of\nstrategically important items in the trade agreements; and\n(3) providing alternative markets for Western European goods,\nparticularly \"soft\" goods, now sold in the bloc.\nMeanwhile, a Coal Action Program Working Group, established\nin late March, has been reviewing East-West trade agreements\ninvolving coal which are coming up for renewal in the near\nfuture. This is being done with the aim of anticipating the\nTRUMAN\ndemands that will be made on the various Western European\nNATIONAL\nRCHIVES AND\nLIBRARY\ncountries and the pressures to which they will be subjected\nREGURDS\nSERVICE\"\nand, wherever possible, recommending means of strengthening\nSOVERNMENT\ntheir bargaining power.\nThis plan of operation was decided upon after the Coal\nAction Program Working Group decided against the proposal of\nurging the Western European countries to import large quantities\nof United States coal, say five million tons, this spring for\nstockpiling purposes. The idea underlying this proposal was\nto take advantage of declining freight rates and the easing\ndemand for vessels. The reasons for rejecting this proposal\nare contained in the Working Group's report of May 12 to the\nSteering Group of the EDAC. The Working Group recommended\ninstead that the MSA, through its representatives abroad and\nin conjunction with foreign government officials, attempt to\ndetermine desirable levels of stocks for each month of the\nyear below which they should not be permitted to fall. This\nis in the process of being done.\nAn encouraging shift has taken place in recent months\ntowards an improved Western bargaining position as far as\n- 14 -\nSECRET\nSECRET\nSECURITY INFORMATION\nPolish coal is concerned. A Polish-Swedish coal contract\nsigned on May 30, after six weeks of hard bargaining, provides\nfor a substantial reduction in prices (although they are still\nhigher than average prices of British coal) and large de-\nliveries prior to October 31. The Danish Government, moreover,\nwas able to conclude an agreement on June 9 which will provide\n750,000 tons of coal at prices based upon those fixed between\nSweden and Poland and approximately 20 percent below those\nagreed last November between Denmark and Poland. This was\naccomplished without making a commitment to deliver a large\nsecond-hand tanker. The United States' liability resulting\nfrom its earlier undertaking to cover the net dollar cost of\nany shortfall in Polish deliveries below 1.17 million tons\nhas thus been reduced from about 16 million dollars to 5 or 6\nmillion.\nThe mild winter of 1951-52, extraordinary United States\ndeliveries to Western Europe of 28 millions tons during 1951,\nand the hardened bargaining attitudes of Western European\ncountries, together with timely exchanges of information\namong Sweden, Demark and Norway, are the principal factors\nin this favorable shift of the terms of trade as regards one\nbasic commodity received from the bloc. Whether this advantage\nwill be retained remains to be seen. But apart from the\nimportant weather factor, this encouraging development points\nup the opportunities that should be actively pursued by way\nof strengthening Western European countries' bargaining\npositions.\nThis encouragement must be tempered with the realization\nthat in some cases, notably the French, it is difficult to\ncalculate the marginal significance of a fairly wide range of\nbasic commodities received from the bloc for which the counter-\npart includes highly strategic goods. Commercial rivalries\nalso continue to render even a small degree of coordinated\nbargaining difficult of attainment. The practice of Soviet\nbloc \"shopping around\", as exemplified by recent Soviet efforts\nto obtain four strategic cargo vessels in the Netherlands--\norders which the French, Belgians and Italians claim to have\ndeclined earlier--could undoubtedly be turned more to the\nadvantage of the West given acceptance of the coordinated\nbargaining principle by all COCOM countries.\nTRUMAN\nARMYSI\n\"NATIONAL\nARCHIVES AND\nRECORDS\nLIBRARY\nU.S.\nSERVICE\"\nSOVERNING\nSECRET\nSECURITY INFORMATION\nMara NATIONAL ARGHIVES TRUMAN ARGORDS LIMIT\n5.5.\nSOVERNMENT\nPRECLUSIVE BUYING\nThe subject of pre-emptive operations has been given ad-\nditional study. On February 28 the NSC Senior Staff asked\nthe Economic Defense Advisory Committee (EDAC) for an evalu-\nation of the NSRB study, \"Analysis of Possible U.S. Objectives\nand Course of Action with Respect to the Initiation of an\nOrganized and Coordinated Program of Covert Preclusive Buying.\"\nAn interdepartmental working group was set up to review the\nNSRB paper.\nIn its report the working group pointed out the many\nlimitations on the use of preclusive buying as an effective\ninstrument to promote economic defense objectives. It recog-\nnized, however, that in special cases preclusive purchase\noperations may be justified, and emphasized that all agencies\n- 16 -\nSECRET\nSECRET\nSECURITY INFORMATION\nshould be alert to such special cases. These conclusions\nwere subsequently noted by the NSC. * EDAC is ensuring the\ncontinuous review of current intelligence in order to identify\nspot cases warranting preclusive treatment and to reach\nagreement as soon as possible of fiscal and administrative\narrangements that would permit the United States to move\nquickly in specific cases.\nNo cases were acted upon in the period under review,\nalthough a number are being investigated.\nTRUMAN\nANDIR\nAROHIVES AND\nLIBRARY\nSERVICE\" REGORDS\n8.5.\nTO\nBEFT\nGOVERN\nsee Memo for NSC from Executive Secretary, subject\n\"Organized and Coordinated Program of Covert Preclusive\nBuying, \" dated June 12, 1952 and NSC Action No. 652.\n- 17 -\nSECRET\nAMOUNT ARCHIVES NATIONAL TRUMAN AND THEREY\nRECORDS\n8.5\nDollar Earnings of European Soviet Bloc\nIn April, in response to questions raised in COCOM, the\nUnited States furnished data on its total 1951 payments\nbalance with the European Soviet bloc which amounted to a\nUnited States deficit of about 68 million dollars. (1952\n- 18 -\nSECRET\nSECRET\nSECURITY INFORMATION\nimports from the European Soviet bloc will be much less than\nin 1951; first quarter imports were only 10 million dollars\nin 1952.) Several COCOM delegations had stated the belief\nthat the United States dollar is one of the most \"strategic\"\nitems, and that failure to control it is a significant loop-\nhole in the control system. Some of the dollar exchange\navailable to the Soviet bloc (mainly Poland, Czechoslovakia\nand the USSR) is undoubtedly used for financing illegal trade,\nbut there is no conclusive evidence on how much of the total\nmight be used thus. In any event, it is the United States\nposition that existing security trade controls prevent or\nlimit Soviet bloc pruchases of strategic items with United\nStates dollars or any other currency, and that the effective-\nness of these controls would be enhanced by physical controls\nover transit trade and transshipments in certain parts of\ncontinental Europe.\nThere have been reports of attempts to ship goods of\nCzechoslovak origin to the United States through third coun-\ntries. This would be an attempt to evade the effects of the\ncurrent inability of Czechoslovakia to obtain consular\ninvoices for direct exports to the United States, and as such\ncould be an indication of a pinching shortage of dollar ex-\nchange.\nTHE MOSCOW ECONOMIC CONFERENCE\nThere has been general agreement among the United States\nand Allied Governments as to the purposes of the Moscow Eco-\nnomic Conference, April 3-12. Its consequences and after-\neffects have been primarily in the political and propaganda\nfields. In general the Conference has had four principal\nresults:\n1. The development of some irritation and suspicion among\ngovernment and business elements in Western Europe, based on\nthe fear of losing present and future marketing opportunities\nin Eastern Europe to competitors. The relative size and\nimportance of the British delegation to the Conference played\nno small part in generating these suspicions, particularly\nSTATE ARCHIVES NATIONAL RECORDS TRUMAN AND LIBERTY\non the part of the Western Germans.\n& GOVERNMENT\n2. The agitation of sensitive issues in various coun-\ntries, such as unemployment in the British, French and Japanese\ntextile industries and the Italian shipbuilding industries,\nand the unsatisfied demand for capital equipment in under-\ndeveloped countries.\n3. The establishment of a new Communist front organi-\nzation, a Permanent Committee for International Trade, to\nfurther the propaganda objectives of the Conference.\n- 19 -\nSECRET\nSECRET\nSECURITY INFORMATION\n4. A small amount of trade. Out of a reported total of\n500 million dollars worth of deals negotiated during the\nConference, only three, involving an aggregate of 10 million\nand which could easily have been made in the absence of such\na conference, had reached the completion stage by mid-June.\nIt is not improbable, however, that the USSR or Communist\nChina will complete one or two substantial deals involving the\nimport of non-strategic goods in the near future to encourage\nWestern participation in a second Conference.\nTHOMAN\nD.S. ARCHIVES \"NATIONAL REGERDS SERVICE\" GOVERNMENT AND 1\nE\nO\ne\nD:\nir\nThe Intelligence Working Group (IWG) held three preliminary\nmeetings during the latter part of June which were concerned\nprimarily with the drafting of its terms of reference.\nCommodity and intelligence specialists of several agencies\nare participating in the overall survey of the items on the\nUnited States strategic control lists (see Title II Activities,\n- 20 -\nSECRET\nSECRET\nSECURITY INFROMATION\npage 5). It 1s hoped that within this process the bulk of\nthe International List II commodities of priority importance\ncan be thoroughly reviewed, and new analyses completed before\nthe Paris discussions, scheduled for October and November,\non 1953 quotas.\nThe Office of Intelligence and Research in the State De-\npartment has initiated a series of analyses of bilateral trade\nand trade agreement relations of East-West European trading\npartners. It is hoped that personnel in other agencies will\nalso be assigned to this project in order to make it possible\nto complete a number of these analyses for use in connection\nwith the forthcoming trade agreement negotiations.\nConsiderable attention has been given during the period\nunder review to developing intelligence on shipping problems\nwithin the economic defense field.\nThe most ambitious project under way during the period\nunder review was NIE 59: \"Relative Strategic Importance of\nEast-West Trade to the Soviet Bloc and to the Rest of the\nWorld\".\nTRUNAH\nAny\nARNATIONAL\nLIMITY\nREGURDS\n& BOYERWINT\n- 21 -\nSECRET\nARGHIVES NATIONAL TROMAM REDORDS LIBERTY\nn.a. s SERVICE GOVERNMENT\n- 22 -\nSECRET\nARE PROVIIVES INSTITUNAL TRUMAN RECORDS\nNE SERVICE sovemi THE\n- 23 -\nSECRET\nby ATTONATIONAL REOGRON 18TH\n0.8 SERVICE\" SOVERNING\n- 24 -\nSECRET\nTHUMAH\nHARING\nUNATIONAL\nAND\nAMORDX\nU.S.\nSERVICE\nGOVERNMENT\n- 25 -\nSECRET"
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