1969-1976, Volume IV, Foreign Assistance, International Development, Trade Policies, 1969-1972|
Released by the Office of the Historian
333. Memorandum From the President's Assistant for National Security Affairs (Kissinger) to the Chairman of the National Security Council Under Secretaries Committee (Irwin)/1/
333. Memorandum From the President's Assistant for National Security Affairs (Kissinger) to the Chairman of the National Security Council Under Secretaries Committee (Irwin)/1/
Washington, June 9, 1971.
/1/Source: National Archives, RG 59, S/S Files: Lot 73 D 288, NSC Under Secretaries Committee Miscellaneous Memoranda 1971-1972. Secret. The decisions in this memorandum were announced to the public in a June 10 White House Press Release; see Department of State Bulletin, June 28, 1971, pp. 815-817.
The President has made the following decisions on the basis of your memorandum of May 13, 1971:/2/
--The Department of Commerce should be prepared to release the list of non-strategic items on general license for export to China.
--Wheat, other grains and wheat flour should be placed on general license for shipment to the PRC, Eastern Europe and the USSR.
--Imports from the PRC should be permitted under a general license subject to possible future import restrictions in the future if trade developments so dictate.
--For items not on the general list, individual export licenses should be considered on their merits.
--In the course of normal interdepartmental review of further items for open general license to Eastern Europe and the USSR, the agencies may consider placing further items on the China open license list. The China items should, however, be submitted to the President for approval before public announcement.
--The Under Secretaries Committee should provide by August 15/3/ an analysis of the results of these initial steps along with recommendations on further measures in this field.
/3/The report was finally sent to the President on January 13, 1972; see Documents 353 and 354.
Henry A. Kissinger
334. Information Memorandum From Ernest Johnston of the National Security Council Staff to the President's Assistant for National Security Affairs (Kissinger)/1/
Washington, June 18, 1971.
/1/Source: National Archives, Nixon Presidential Materials, NSC Files, Subject Files, Box 402, Trade, Volume IV 7-12/71. No classification marking. A copy was sent to Sonnenfeldt. At the top of the page Haig wrote: "Houdek--Tell Jon Huntsman again," and Houdek wrote: "Done 6/28/71."
Pete Peterson has informed his staff of his conversation with you at lunch on June 16 in which you notified him that you did not wish to send to the President Peterson's memorandum proposing a telephone call to Henry Ford on possible government considerations of the Kama River project./2/
/2/In a June 15 memorandum to Kissinger briefing him for a June 16 lunch with Peterson, Johnston wrote: "Peterson wished to send a memorandum to the President asking permission to inform Henry Ford in advance that we may shortly reconsider American participation in the Soviet Kama River truck project. You indicated that you did not wish to do this at this time, and that future East-West trade questions should be handled by you. Peterson is sure to ask about your reaction to his memorandum." Johnston's memorandum continued: "You should discuss with him the timing which you anticipate on future East-West trade moves, and also get his agreement on the mechanism for submitting these issues to the President, i.e. joint memoranda or personal clearance by you of all his memoranda on this subject. Peterson believes that American commercial interests have heretofore been neglected in the East-West trade issues; and he is unlikely to welcome the idea that political considerations be governing." (Ibid., NSC Files, Agency Files, Box 218, CIEP) See also footnote 6, Document 318.
In addition, Peterson informed his staff that you and he agreed that his small working group on East-West trade should begin preparation of a paper to put to the President specific options for a piecemeal approach to the Kama River project. Peterson has also called for consideration of an alternative approach whereby we might use U.S. approval of the Kama River project as a lever on subsequent Russian purchases from the United States.
The Peterson task force will not have a draft until next week. Subsequently, the paper will need ample technical staffing by Commerce and State as well as Defense before it can go to the President.
Peterson may also shortly propose to you a cable to go to Moscow in answer to the request put to Peterson in April by Soviet Deputy Minister of Foreign Trade Komarov for an answer before June 25 on U.S. participation in the Kama River project./3/ That cable will merely inform the Soviets that the U.S. has not come to a decision on this issue./4/ Peterson says that you had decided to convey the same message to Ambassador Dobrynin./5/
/3/Komarov visited Washington in May; see Document 332.
/4/A draft message, prepared by R. B Wright (who had also participated in Peterson's May 17 meeting with Komarov) on June 7, is attached to Johnston's June 15 briefing paper for the Peterson luncheon.
/5/In the margin next to this and the following paragraph, Kissinger wrote: "There is to be no separate Peterson communication to Soviets. Al, please make sure--The memo must go through me."
Peterson's task force will also have shortly a proposed memorandum from you and Peterson, as you jointly agreed previously, outlining a list of the actions which the United States could take should we wish to move on the East-West trade front. As I envision it, and Peterson's staff is in accord, this would merely list for the President a sequence of actions for future decision on which we would ask the agencies to submit issues papers according to a timing worked out subsequently by you and Peterson. Peterson might wish the scenario memorandum to be a vehicle to forward the recent interagency study on East-West trade potential, or he might wish to send the latter separately.
335. Editorial Note
Peter Peterson and Ambassador Dobrynin met on June 26, 1971. A handwritten note from Peterson to Kissinger regarding the meeting reads as follows: "June 29--I saw Dobrynin Saturday nite as I am sure Al Haig consulted with you. I decided to say nothing unless he said something. At the very end of the meeting on the way out, he grabbed me rather intensely and said 'It is very important that you (Peterson) and I get together soon so this trade deal does not blow up because of something you and I do not do.' I said you would be calling him today and he said 'that's fine, but it is still very important that you (Peterson) and I meet soon.' I said nothing." (National Archives, Nixon Presidential Materials, NSC Files, President's Trip Files, Box 491, Dobrynin/HAK 1971, Volume 6, Part 1)
The memorandum of Kissinger's June 28 conversation with Dobrynin reads in part as follows: "I told Dobrynin that I would give him a preliminary reply to the Kama River Project on Wednesday evening, particularly the stages at which it could be accomplished. I told him there was no sense bringing public pressure on us and that we would appreciate it if this pressure would stop. We were moving as fast as possible." The memorandum of conversation is attached to an undated memorandum from Kissinger to the President informing him of the meeting with Dobrynin. Regarding the Kama River project, Kissinger wrote: "I promised Dobrynin a reply on the Kama River Project in a couple of days and cautioned him not to try to pressure us." (Ibid.)
336. Memorandum From Ernest Johnston of the National Security Council Staff to the President's Assistant for National Security Affairs (Kissinger)/1/
Washington, June 30, 1971.
/1/Source: National Archives, Nixon Presidential Materials, NSC Files, President's Trip Files, Box 491, Dobrynin/HAK 1971, Volume 6, Part 1. Confidential. Kissinger wrote "Port Security" at the top of the page. Documentation on access of Soviet ships to American ports (and reciprocal access of American ships to Soviet ports) and security procedures to be followed when Soviet ships were in U.S. ports is ibid.
The Soviets plan that the Kama River Truck Project will consist of six main production shops, described in the table below. The table also indicates the degree of technological complexity of each segment as well as Mack Truck Company estimates of costs.
At present three U.S. companies have filed applications for licenses and one company has indicated that it will file shortly:
Mack Truck--general technical services and equipment--$750
It is possible to grant export licenses on an incremental basis, though very difficult to justify. We could for example indicate that we would now grant licenses for specific segments of the project, i.e. those of less technological complexity, but that we would consider later applications relating to the more complex elements. We could not under this approach grant the license for which the Mack Truck Company has now applied, since it covers the entire operation. We could, however, indicate to Mack that we would approve segments of its application relating to the approved parts of the project.
The advantages of such an approach would be that it permits a low silhouette for the U.S., allows us to graduate the extent of U.S. participation as the public becomes accustomed, and clearly shows we will at first restrain our cooperation to the less advanced parts of the project.
The disadvantages of the piecemeal approach are that: U.S. companies would be hindered from presenting bids for some segments until too late in the Russian plan; the legal national security justification for U.S. participation in one part of this massive truck factory but not in other parts would be weak; and the approach will discriminate against companies interested in the delayed segments.
337. Memorandum From the President's Assistant for International Economic Affairs (Peterson) and the President's Assistant for National Security Affairs (Kissinger) to President Nixon/1/
/1/Source: National Archives, Nixon Presidential Materials, NSC Files, President's Trip Files, Box 491, Dobrynin/HAK 1971, Volume 6, Part 1. Confidential. The memorandum is Tab B to a June 30 memorandum from Johnston to Kissinger. Tab A is a June 30 memorandum from Hinton (acting for Peterson) to Kissinger providing talking points for Kissinger's meeting with Dobrynin that evening. Hinton noted that Peterson had told Kissinger the previous day that "the object of the exercise would be to work toward a situation in which U.S. participation in the Kama River truck plant might be linked to Soviet purchase from us of consumer goods and equipment to manufacture consumer goods." In suggested talking points Hinton pointed out that Komarov had recognized that such a linkage would help the President fend off criticism from political conservatives. In his covering memorandum, Johnston called Hinton's talking points "excessively positive" in the absence of a firm decision and took exception to the possible linkage of Kama with additional purchases of non-strategic imports from the United States, which would hinder U.S. firms' participation in the Kama project because they would face additional obligations not imposed on Western European competitors. Johnston noted that "such an approach would hinder the U.S. commercial opportunities, be less forthcoming with the Soviets, and would open the possibility of a comprehensive trade negotiation with the Russians, which would expose us to exceptional demands and might prove fruitless." In a June 30 note transmitting the package to Kissinger, Haig noted that "no one was acquainted with your specific requirements as conveyed privately to Peterson" and added that he did not "see anything for your use tonight [with Dobrynin] except for the more general considerations outlined in the strategy paper at Tab B."
For the past two years the Administration has generally, with a few exceptions, refrained from significant liberalization in our trade relations with the USSR and Eastern Europe. The exceptions have been:
--A gradual but relatively unimportant decrease in our export control lists under the review procedure called for by the Export Administration Act of 1969.
--A few favorable decisions in the COCOM allowing European countries to ship marginal items to Eastern Europe.
--Granting of export licenses in May for the shipment of $86 million of truck manufacturing machinery, including the Gleason application.
--Elimination of 50% American shipping requirement on grain sales in the context of our China policy.
Now, however, there has been a gradual increase in commercial and Congressional pressure for us to take further steps. In addition over the rest of the year there may be developments in our general relations with the Soviet Union and Eastern Europe justifying further moves. We should now examine what these moves might be and how we can prepare the technical staffing for decisions. Such preparation does not imply approval of these moves, but merely prepares the way for decisions. We already have in hand an interagency study of the trade potential involved in these measures.
Because of the variety of our controls on East-West trade, we have a number of fields in which we can take action:
--a decrease in the differentiation between the U.S. export controls and those of other Western countries;
--a decrease in the level of the international controls;
--credits for the Soviet Union;
--a decrease in our discrimination against imports from the European Communist countries.
This gives us a range of greater or lesser actions we could take in logical sequence. The first actions would be those of least consequence or those in which a time factor is important. As the technical staffing is completed on each of these issues, you could approve the actions, delay decisions, or disapprove the proposals. The agencies would prepare individual papers discussing the domestic, foreign and commercial issues involved in each step.
The sequence is as follows:
1. Reconsideration of pending applications by U.S. companies for export licenses to sell U.S. petroleum catalytic cracking refinery plants to Eastern Europe. These are small cases, involving about $8 million, for permission to send primarily to Poland the same type of equipment which we sent to Romania in 1965. You decided to delay issuing these licenses in August 1970,/2/ but the American companies claim that time is running out since the Poles can buy this equipment elsewhere. Commerce is now preparing an interagency paper for submission on this issue.
/2/See footnote 5, Document 319.
2. Consideration of whether to allow U.S. companies to participate in the Russian construction of a huge new truck factory on the Kama River. A number of U.S. companies have been approached. Henry Ford turned down the project after a negative public statement by Secretary Laird. The Mack Truck Company has pending a $700 million export license application and several other companies have made smaller applications. There are several options available on approaching this question including:
--approval of piecemeal U.S. participation only in segments of the proposal;
--approval of U.S. participation in all aspects of the proposal;
--approval of U.S. participation provided the Russians agree to other commercial purchases from the U.S.
Most of the equipment for this project can be obtained from Western Europe and there are no export controls hindering shipment from there. The U.S. still demands specific export licenses for this type of equipment despite the fact that other nations do not do so. The magnitude of the project, well over $1 billion, and the necessity that the Soviets decide quickly argue for your being able to make a decision on this issue shortly should you wish to do so. The agencies are preparing an options paper.
3. A general reduction in unilateral U.S. export controls down to the level prevailing in Western European countries under the International Coordinating Committee (COCOM). The U.S. requires specific export licenses, and sometimes refuses them, on a number of items which other western countries freely ship to Eastern Europe. By reducing our controls to the international level we would place our firms on a level equal to that of Western European firms and no longer need make decisions in specific cases such as the Kama River project. In so doing we might reduce European eagerness to relax the COCOM restrictions, since they would know we could then compete.
4. Extension of Export-Import Bank loans guarantees and insurance should Congress eliminate the Fino Amendment. The Fino Amendment prohibits Export-Import Bank transactions in countries trading with North Vietnam, i.e. Eastern Europe and the Soviet Union. Despite Administration opposition, the Senate has already passed a bill repealing the amendment and the House may follow. This would give you the discretion of allowing Export-Import Bank transactions in Eastern Europe and the Soviet Union. Should Congress pass this legislation early this summer, you would need to decide whether to exercise this discretion. (We could also drop our opposition to the legislation.) The Eastern European Governments have constantly claimed that lack of Export-Import Bank guarantees, insurance and loans have inhibited our sales in those markets.
5. A relaxation of the U.S. veto on requests by other Western European countries to export items to Eastern Europe as exceptions to the international COCOM lists. Many Western European countries, as well as the United States, request COCOM to grant exceptions on specific transactions. The United States, however, is the most frequent vetoer of such requests. We could adopt a somewhat less negative posture generally and ourselves seek more exceptions for U.S. exports.
6. A reduction in the international COCOM lists. The COCOM will review its lists in October. Many Western European countries will propose that hitherto forbidden items be allowed to be exported freely to Eastern Europe. The United States will probably be the principal resister to such requests. We could decide to be less negative. In any case, the United States will need a position well before October.
7. Request for, or support of, legislation allowing most-favored-nation treatment for the Eastern European countries. Legislation now requires that we collect Smoot-Hawley tariff rates on imports from most Communist countries. Bills have been introduced in the Congress giving you discretion to reduce those rates to most-favored-nation levels in connection with reciprocal trade agreements with those countries. We oppose those bills, but you have decided that we would not oppose such legislation directed solely at Romania. We could also indicate a more favorable Administration position toward legislation affecting other Eastern European countries.
8. Proposal of legislation to repeal the Johnson Act. The Johnson Act forbids certain kinds of credits to countries which have defaulted on debts due the United States. The effect of the Act is ambiguous, since interpretations now exempt commercial export and Export-Import Bank credits from its restrictions. State is currently preparing a request for a ruling by the Attorney General that would clear up some of these ambiguities, since many businessmen see the Act as a serious obstacle to normal financial and commercial relations. Eventually, however, these ambiguities can only be totally eliminated by repeal of the Act.
It may not be possible to follow this sequence completely, but it is a general indication of the order in which steps might be taken. We would not necessarily always use the same bureaucratic mechanism in presenting issues for your decisions, since some of these actions, particularly on unilateral U.S. export controls, would generally come through the Secretary of Commerce and include comments of other agencies, while other issues might be better handled through the Under Secretaries Committee or other mechanism. To avoid a leak about a massive reconsideration of U.S. policy, we propose initiating these papers over a period of time, rather than all at once.
The agencies are already preparing issues papers on Steps 1 and 2; and we will shortly send them to you. We would propose initiation of an options paper on some of the next steps shortly, with the others to follow later.
That we gradually instruct the agencies over a period of time to prepare options papers on these issues more or less in the order listed above, so that we shall be in a position for decisions should we wish to take action in this field./3/
/3/Neither the Approve nor Disapprove option is checked.
338. Information Memorandum From Ernest Johnston of the National Security Council Staff to the President's Assistant for National Security Affairs (Kissinger)/1/
Washington, July 1, 1971.
/1/Source: National Archives, Nixon Presidential Materials, NSC Files, Subject Files, Box 402, Trade, Volume IV 7-12/71. Confidential.
After the flurry and confusion last night in preparing information we needed for your conversation with Ambassador Dobrynin, I fear there may be some misunderstanding between you and Peterson over what he is to do to prepare for future decisions on East-West trade relaxation.
You and he have had several conversations. My sole source of information on what went on in those conversations is from Peterson's staff. Consequently, I hope it will be helpful if I outline to you where the Peterson operation now stands on this subject.
Peterson understands that you are in charge of this field. He is now considering the draft of a joint memorandum from you and him to the President which would outline a scenario of future moves. This scenario would merely list the possible actions we could take and would propose that over a period of time you and Peterson would ask the agencies to prepare separate options memoranda on each issue for submission to the President. I had hoped that Peterson would have this draft to you last week, but I presume he will send it forward now shortly. I sent a copy of it to you last night and another copy is at Tab A./2/
On the Kama River Project, Peterson believes that you agreed that Commerce is now to prepare a paper for submission to the President, incorporating the views of State and Defense and listing the precise options that we would have. These options would be as follows:
--Denial of U.S. company participation or continued delay in any decision.
--A piecemeal approach with several variants similar to the one I outlined in my memorandum of June 30 at Tab B./3/ Any of these piecemeal solutions would indicate some U.S. participation but not blanket acceptance of the entire proposal at this time.
/3/See footnote 1, Document 337.
--A blanket approval for U.S. company participation in all aspects of the Kama River Project.
--A blanket authorization for U.S. participation in the entire project provided the Russians agree to additional commercial purchases from the United States. (The Soviet Trade Delegation under Deputy Trade Minister Komarov had proposed the purchase of pencil sharpener factories, furniture factories, etc. if we agree to Kama.)/4/
/4/See Document 332.
I am hopeful that Peterson will send a draft of the scenario memorandum to you in the next few days. Commerce will try to submit the memorandum on the Kama River Project by the end of next week. It would be difficult for them to do this earlier if they are to incorporate the views of Defense, although the Commerce draft worked out by Peterson's ad hoc group is in fairly good shape. After Secretary Laird's memorandum to the President on June 22, 1971,/5/ I do not think that we should go to the President for a decision on this project without incorporating Laird's views, especially since he took such a strong stand when Henry Ford was involved.
I intend to continue cooperating with Peterson's staff along the lines mentioned above, unless I hear from you that these conflict with your understanding.
339. Information Memorandum From the President's Assistant for International Economic Affairs (Peterson) to President Nixon/1/
Washington, July 7, 1971.
/1/Source: National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 218, CIEP. Confidential. Attached to a July 12 memorandum from Howe to Haig bringing to his attention this memorandum as well as two others from Peterson. On July 27 Huntsman sent Kissinger a memorandum informing him that the President had read this memorandum "with interest" and had requested that a copy be sent to Kissinger for his information. Johnston brought Peterson's memoranda to Kissinger's attention under cover of a July 28 memorandum. (Ibid., Subject Files, Box 402, Trade, Volume IV 7-12/71)
Our interagency CIEP study assessing potential economic gains for the United States were we to make specified changes in our East-West trade policies is now completed./2/ CIA played an important role in developing these estimates which were agreed on, at staff level, by all agencies that participated. (Chaired by Commerce, with CIA, Defense, State, Labor, Treasury, NSC, FRB, Interior, Ex-Im Bank, Agriculture and OMB.)
/2/The study was requested in Document 327.
It is perhaps surprising that the Defense representative, who is opposed on security grounds to relaxing our restrictions on trade with the USSR and Eastern Europe, agreed.
The main points made by the study follow:
East-West trade in goods grew faster during the sixties than either world or U.S. trade, reaching $15 billion in 1970./3/ At less than $600 million of exports and imports, the U.S. level and share in East-West trade of about 4 percent remained relatively insignificant. Expansion of the U.S. share in East-West trade depends largely on the removal of U.S. legal and administrative restrictions consonant with overall U.S. policy goals.
/3/This becomes $17.2 billion if we include trade between Eastern European countries and less developed countries. [Footnote in the source text.]
It is estimated that the following effects on U.S. trade by 1975 would result under varying assumptions.
(1) The United States continues its present restrictions. Total annual trade of goods would reach $800 million, U.S. exports of $440 million and U.S. imports of $360 million. U.S. trade surplus of $80 million. In addition, a gain of $75 million from sales of technology but a loss of $35 million from tourism would result in a positive balance of payments of $120 million.
(2) The U.S. removes the 50/50 shipping requirement on grains. U.S. exports would increase by some $62 million. (This has been done.)
(3) The U.S. reduces export controls to the COCOM level. U.S. exports would increase by $260 million.
(4) The U.S. removes the embargo on Soviet furs and the prohibition on the use of Federal funds for buying goods from Eastern Europe. U.S. imports of furs could rise to $50 million annually. No benefit to U.S. exports by 1975 of lifting the prohibition on the use of Federal funds; however, possible gains by the East in bidding on some U.S. Government contracts.
(5) The U.S. removes the prohibitions on Government credits and credit guarantees (Ex-Im Bank). U.S. exports would further increase by about $100 million.
(6) The U.S. grants Most Favored Nation tariff treatment to all Eastern European countries. U.S. imports would increase by about $90 million. U.S. exports would grow considerably less.
(7) The United States removes all unilateral restrictions on trade by the end of 1971; i.e. steps 2-6 made all at once rather than gradually. Total trade of goods would reach $1.6 billion. U.S. exports would reach $1 billion and U.S. imports some $600 million by 1975. Secretary Stans feels these numbers are conservative and the actual U.S. exports would amount to $2.5 billion.
To sum up the effect on trade of goods:
The attached table shows the estimated composition of this $1 billion worth of U.S. exports in 1975. (Tab I)/4/
/4/The one-page table, disaggregated with estimates on food and tobacco ($235 million), crude materials ($150 million), mineral fuels ($50 million), chemicals ($50 million), machinery and equipment ($465 million), and miscellaneous manufactured goods ($50 million), is not printed.
In addition, a gain of $150 million from sales of technology but a loss of $50 million from tourism would result in a total increase in U.S. exports of $950 million and a total positive U.S. balance of payments surplus of $500 million--or about four times the estimated amount under status quo conditions.
Thus, for ease of remembering, you might say that more or less complete liberalization would add by 1975 about $1 billion to exports and something like $400 million to our balance of trade as compared to leaving the restrictions where they now stand.
The agencies agree that the principal limitation on the overall level of East-West trade in 1975 is the ability of the Eastern countries to earn hard currency foreign exchange. It was assumed that these countries would not expand substantially their credit buying in Western countries. If this assumption is wrong, i.e., if the USSR for example, were to depart from its traditional conservative policy on credit, then total exports from the West would be very considerably higher, as would exports from the United States.
You know I'm sure that [sentiment in?] the U.S. business community and the Hill is growing daily to liberalize East-West trade, and our second successive month of trade deficits is being used as another reason.
As you know, I am working closely with Henry Kissinger on this whole matter, starting with the Kama River project. My input is essentially that of the economic possibilities. Henry, of course, is handling the contacts with Dobrynin and the linkage to other negotiations with the Russians.
Thus, I fully understand the primacy of demonstrated progress on the other negotiations. Accordingly, I am doing what I can to restrain any premature Administration enthusiasm on this subject of East-West trade.
340. Memorandum From Ernest Johnston of the National Security Council Staff to the President's Assistant for National Security Affairs (Kissinger)/1/
Washington, July 13, 1971.
/1/Source: National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 213, Commerce Volume II 1971. Confidential. At the top of the page, a note by Kissinger reads: "Why can't we do nothing"; another by Haig reads: "Ernie call me." Kissinger arrived in San Clemente the morning of July 13 from a trip to Asia and Paris that had included a trip to Peking. (Ibid., White House Central Files, President's Daily Diary)
Secretary Stans proposes in a memorandum of July 13 (Tab A) that the Administration indicate privately to several key Congressmen that it would accept an Export-Import Bank bill which drops the Fino Amendment.
The Fino [Amendment] prohibits Export-Import Bank credits to nations trading with North Vietnam and effectively eliminates Ex-Im transactions with Eastern Europe. Senate and House conferees will meet in the next few days, probably early next week, to reconcile differences in the Export-Import Bank bill. The Senate version dropped the Fino Amendment, the House retained it. (Both versions meet the President's goal of eliminating Ex-Im from budget constraints.)/2/ Secretary Stans maintains that the only reason the House retained the Fino Amendment was because many members had the impression that the Administration was adamantly opposed to deleting it. (The record of the debate indicates a more neutral Administration position.) Bill Widnall, the House Republican conferee, told Secretary Stans that he expects the conference committee to delete Fino, and he wants an indication of how the Administration will react.
/2/Congress approved the Export-Import Bank bill without the Fino Amendment, and President Nixon signed it into law on August 17, 1971. (P.L. 92-126; 85 Stat. 345)
NSDM 99/3/ states that the Administration would oppose Congressional initiatives in the East-West trade field, though "only in a very low key way". Subsequently you directed that Administration witnesses testify that if the amendment were dropped, over our low key opposition, the Administration would use its authority under the present circumstances only to extend credit to Romania.
Stans' suggestion is that Commerce inform Senate and House conferees as well as the House Republican leadership that the Administration would support a conference bill containing a repeal of Fino. He believes this indication can be given privately and would not contradict the earlier policy but would erase the previous misunderstanding in the House.
It is not clear that any Administration action is necessary at this point. The Senate may well prevail over the House, eliminate the Fino Amendment from the conference report; and the House may accept this version. However, there is some risk in a "hands-off" approach. Secretary Stans' proposal would probably insure repeal of the amendment, but it would also effectively constitute a reversal of the Administration policy. Timmons' staff thinks we may need to be even clearer against Fino.
I do not know your plans for a series of East-West trade moves later this year. If you do expect broad liberalizing changes, we should act now to be able to use Export-Import Bank credits in future dealings with Eastern Europe. Elimination of the Fino Amendment would preserve that option, and the Administration would then be able to extend these credits should it wish to do so. Should it wish not to do so, it would still have the power to withhold these credits. On the other hand, should the House conferees hold firm and the Senate accept retention of the amendment, then the Administration would have lost the option of including Export-Import Bank credits in a package of East-West economic measures. The basic Ex-Im legislation will be renewed at least until 1974, so that repeal of Fino would not be considered before then, except as special legislation.
If you do wish to take advantage of this opportunity, I suggest that Secretary Stans' memorandum be forwarded to the President with a concurring recommendation. Pete Peterson would also concur. However, if the President agrees, rather than leaving the matter wholly in the exuberant hands of the Department of Commerce, I would suggest that you cable the memorandum at Tab B to Secretary Stans and Clark MacGregor jointly.
1. That, if you expect the need for a series of East-West trade moves, you approve preparation of a memo for the President with a positive recommendation./4/
/4/Neither the Approve nor Disapprove option is checked.
2. That if the President concurs, you send the memorandum at Tab B to Secretary Stans and Clark MacGregor./5/
Memorandum From Secretary of Commerce Stans to President Nixon/6/
Washington, July 13, 1971.
/6/No classification marking. Copies were sent to Ehrlichman, Peterson, and Kearns.
The Fino Amendment (1968) to the Export-Import Bank Act of 1945 precludes the use of Eximbank credit facilities in transactions involving exports to any country which engages in armed conflict with the United States; or to any other country which furnishes goods, supplies, military assistance or advisers to a country which engages in armed conflict with the United States.
The position of the Administration, as stated in NSDM 99 and an Under Secretaries Committee Memorandum (March 1971),/7/ is to oppose in low key any modification of the Fino Amendment. The Memorandum further prescribes that if the Congress should nevertheless enact a repeal, then the President would consider authorizing Eximbank credit facilities for our trade with Romania.
/7/Presumably a reference to a March 10 memorandum from Staff Director Arthur Hartman to members of the Under Secretaries Committee regarding U.S. economic relations with Romania. Hartman reported the President's decisions with respect to a December 15, 1970, memorandum from Acting Chairman Samuels. (National Archives, RG 59, S/S Files: Lot 83 D 276, NSC-U/DM 14B) The first of the President's decisions is the substance of NSDM 99. The second was that if the Fino Amendment were repealed over Nixon administration opposition, administration witnesses should testify that Romania was the only country currently covered by the amendment to which Export-Import Bank loans would be extended at that time. Finally, the Commerce Department was instructed to set up a new export control category for Romania to accord it the same status as Yugoslavia on exports of U.S. goods. (Ibid., NSC-U/DM 14A)
The Interdepartmental Study for CIEP, "U.S. Stake in East-West Trade," demonstrates the need for export credit facilities for Eastern Europe if the United States is to obtain its appropriate share of this market./8/
/8/See Document 339.
In April 1971 the Senate passed, by 66-1, a bill which, among other provisions, would repeal the Fino Amendment. The House Banking Committee in June 1971 reported out a bill similar to the Senate version. However, when the bill was considered on the House Floor, Representative Chalmers P. Wylie (R-Ohio) proposed an amendment to preserve the Fino Amendment, and this was adopted on July 8 by a vote of 207 to 153. Indications are that the Wylie Amendment was passed because it was believed that the Administration was adamantly opposed to the removal of the Fino Amendment. The House and Senate bills now go to Conference shortly, but possibly Wednesday, July 14.
The Commerce Department's testimony on the House bill is in accord with NSDM 99, and its legislative comments on both House and Senate bills mildly opposed removal of the Fino Amendment. Assistant Secretary of State Trezise's testimony on the House bill reflected in addition the Under Secretaries Memorandum which indicated the possibility of extending credit facilities for our trade with Romania. Eximbank President Kearns testified that his agency did not make policy and had no position on the Fino Amendment.
Subject to White House agreement, Commerce proposes discussions with the Senate and House Conferees and the House Republican leadership, to give assurances that the Administration would support the Conference bill if the Fino repeal is included.
Commerce believes that given the early misunderstanding in the House and the importance of retaining for the President the option of extending Eximbank credit to Communist Countries at his discretion, this action is not only desirable but also, given its low key and private nature, does not contradict earlier policy as set forth in NSDM 99. Henry Kearns, President of Eximbank, concurs with this recommendation.
341. Memorandum From the President's Assistant for International Economic Affairs (Peterson) to the President's Assistant for National Security Affairs (Kissinger)/1/
Washington, July 19, 1971.
/1/Source: National Archives, Nixon Presidential Materials, NSC Files, President's Trip Files, Box 492, Dobrynin/HAK 1971, Volume 7, Part 2. Top Secret.
At San Clemente you asked for alternative piecemeal approaches that might be used in your meeting today with Dobrynin./2/
/2/Kissinger was in San Clemente July 13-18 and returned to Washington with the President. He met with Dobrynin on July 19; in his July 27 memorandum to the President reporting on the conversation, Kissinger noted that he informed Dobrynin that "we might be able to do the foundry part of the Kama River Project ($175 million worth)." (Ibid.)
1. Kama River
I have pressed very hard again to find a separable item and I think the best possibility we have come up with is the Foundry portion (see Tab A)./3/
/3/None of the tabs is printed.
It is a reasonably discrete element of the total Kama River project. One could argue whether a decision on our part to authorize participation of a foundry is similarly discrete in the minds of U.S. business. In other words, U.S. businessmen would probably have trouble understanding why the foundry was cleared but nothing else. It may be that we should even consider at some point saying that it is mixed in with other non-economic considerations and we don't therefore expect it to make economic sense. I am presuming the Russians know the linkage in any event.
We now have three foundry applications that have an aggregate value of $175 million but there is undoubtedly redundancy here. Thus, in actual practice if all three were accepted, we would probably find the total volume significantly less than this.
Even so, if this kind of number bothers you, you can always try getting some Russian purchases of consumer goods and consumer goods manufacturing equipment. You will remember the argument to them might be that anything that appears to U.S. critics to result in a diminution in defense effort (as consumer goods spending might) helps assuage concerns of segments of U.S. public who might feel the Kama River project by itself has too much potential defense content.
In case you have any time for more reading, I show in Tab B the current status of the Kama River inter-agency draft you and I agreed we should try to get done soon, including Defense.
Also, included is the latest Mack Truck wire to the Soviets which went out Friday indicating the particular questions they have but keeping it open (Tab C).
2. Control Data Computer
The other significant pending application is by Control Data Corporation for a Model 6400 computer (quite advanced) for the Institute of High Energy Physics at Yerevan.
This involves COCOM clearance and if you decided to go ahead with it, I would assume you would want to impose the same kind of safeguards we imposed on the British on their recent computer deal with Russia (ICL computers)./4/
/4/See Documents 332, 373, and 374.
Also, you should know that this is not too far along in the inter-agency process but I suppose this could be speeded up.
This strikes me, Henry, as the kind of item you could offer (a) if you were looking for something quite symbolic in the aftermath of the China move, and/or (b) something you could talk about conditionally (i.e. it would take time for example to work out safeguards) in the event you wanted something positive with stalling potential if later it did not seem appropriate.
I have talked to Ed David about this and he has written a very brief memo in Tab D that summarizes the situation. Please read it and note he emphasizes inspection safeguards are required but, on balance, he feels it is a reasonable possibility.
3. Petroleum-Hydro-Cracker Technology
While we have no specific applications on this, we do know there has been general Soviet interest in U.S. technology in this field in the past.
On your desk somewhere, you will probably find a letter for your signature to the President on similar technology to Poland.
It might even fit your negotiating plans to offer this to the Russians at the same time or even first, indicating you did not want to appear to be discriminating in favor of the Poles. The difference here, of course, is that the Poles have expressed very specific interest in this technology (to me directly and to Dr. Edward David) whereas the Russian interest has been more general. Thus, its leverage potential with the Russians is conjectural.
I hope one or more of these is helpful to you.
342. Memorandum From Ernest Johnston of the National Security Council Staff to the President's Assistant for National Security Affairs (Kissinger)/1/
Washington, July 23, 1971.
/1/Source: National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 213, Commerce Volume II 1971. Limited Official Use.
Secretary Stans has asked to speak with you for ten minutes.
I am not sure what he wishes to raise, but he may wish to talk about:
The Fino Amendment
Stans wrote to the President on July 13 asking that he be allowed to inform key Senate and House conferees that the President would soften his already low-key opposition to elimination of the Fino Amendment from the Export-Import Bank Bill./2/ (The Fino Amendment forbids Ex-Im credits to countries trading with North Vietnam.)
/2/Tab A to Document 340.
You correctly foresaw that no Administration change was necessary, but we have not responded to Stans' memorandum. The conferees voted yesterday to eliminate the amendment. This should answer Stans' question, but he may still feel that the Administration needs to soften its position to avoid having the House restore the amendment on the floor. He would argue that we now have the opportunity to restore Presidential flexibility with little chance of public exposure. Ex-Im Bank legislation will not come up for consideration again for another four or five years.
You might state that you do not wish the Administration to take any action that the Soviets would recognize and interpret as a change of signals on the Vietnam war or in our general relations.
The Kama River Project
Stans wants the Administration to approve U.S. industrial participation in the Soviet construction of a huge truck factory, the Kama River truck factory. Stans is preparing an options paper to go to the President, but Defense is holding the paper up by not sending him its comments. The Soviets have notified the U.S. firms that the previous June 25 deadline for U.S. Government approval has been extended to July 25. There is no chance that the President will make a decision by that time.
Stans may wish to ask that we inform the Russians that they should not hold fast to any deadline since we are still considering the project actively.
You might tell Stans that we have so far not found that the Russians have been very serious about these deadlines, particularly on a project so important as Kama River. Though you may not wish to tell Stans any of the details of your conversations with Ambassador Dobrynin,/3/ you could tell Stans that the Soviets are perfectly aware that we are still examining the project. In addition, their bargaining leverage has somewhat diminished now that Mack Truck has told them that it wishes to renegotiate the terms of its contract.
/3/See Document 332.
343. Action Memorandum From the President's Assistant for National Security Affairs (Kissinger) to President Nixon/1/
/1/Source: National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 218, CIEP. Confidential. This memorandum is part of Tab A to Document 345. Tab A also includes other memoranda concerning the Mack Truck application: July 27, 28, and 29 memoranda from Johnston to Haig and a draft memorandum from Kissinger to Stans (prepared by Johnston) that is substantively the same as Document 346.
Secretary Stans has proposed that you authorize him to approve now three pending applications for U.S. participation in the foundry plant of the Soviet Kama River truck factory (Tab A)./2/
/2/In his July 26 memorandum to Kissinger, not printed, Stans noted that it supplemented his July 23 memorandum to the President, which has not been found.
The Kama River factory is expected to produce 150,000 three-axle diesel trucks annually by the late 1970s. CIA states that three-axle trucks are not tactical military vehicles, though some could end up in military motor pools. CIA estimates that the Russian expenditures on the entire Kama River project will approximate $3 billion, much of which however will be used to erect factory buildings, workers' housing, etc. CIA estimates that perhaps $1 billion of the total will be used to procure foreign machinery and technology, of which $200 million might be spent in the United States if we granted blanket permission for U.S. participation. The CIA analysis is at Tab B./3/
The Kama complex will consist of six discrete elements:
1. Foundry plant
Commerce now holds four formal U.S. export applications. The application by Mack Trucks, Inc., of Allentown, Pennsylvania, for $750 million of technical services and equipment is not active, since Mack is re-negotiating its arrangement with Russia. In any case, Secretary Stans doubts that the Mack Truck application is a realistic estimate of what the Soviets would procure from that company.
The other three applications are for technology and equipment for only the foundry, one of the first phases of the Kama complex. Stans estimates that the total Russian expenditure on the foundry will be $450 million, only a fraction of which would come from the U.S. The three applications are by:
--The Swindell/Dressler Company for $13.5 million of technical services. The company claims it has a firm offer from the Soviets, and it expects a follow-on order for $20 million of equipment. Swindell/Dressler is at Pittsburgh.
--The C.E. Cast Division of Combustion Engineering, Inc. for $37 million of automatic molding equipment and core making machines. The Cast Division is at Pittsburgh but Combustion Engineering has plants in Mass., N.J., Texas, Conn., N.Y., Ohio, Kansas, Illinois, Florida, R.I. and Oklahoma.
--The Jervis B. Webb Company for $125 million of conveyors and other foundry equipment. Webb is at Detroit, but it also has plants at Avon Lake, Ohio, Cohasset, Mass., and Boyne City, Michigan.
These applications are all partially competitive with each other, and consequently if approved would result in exports of less than their total combined value.
The applications have been pending for some time. Secretary Stans argues that even if we are not ready to approve U.S. participation in all aspects of the Kama River Project, we should go ahead with these now before the Soviets go elsewhere.
I agree with Secretary Stans. The companies have already been unable to meet two deadlines given by the Russians. Though any approval of U.S. participation will be seen as a major signal by the Russians, we can reduce the effect of this if we indicate that we are only approving three specific licenses at this time but are not now giving approval for U.S. participation in all aspects of the project. To keep this matter firmly under the control of the White House I plan to ask Secretary Stans to submit all future Kama applications for your consideration.
That you approve Secretary Stans' request to authorize issuance of the three pending licenses: Swindell/Dressler for $13.5 million, C. E. Cast for $37 million and Jervis B. Webb for $125 million./4/
/4/Neither the Approve nor Disapprove option is checked.
344. Editorial Note
Henry Kissinger met with Soviet Ambassador Dobrynin on July 29, 1971, in the White House. The memorandum of conversation reads in part:
"I opened the meeting by informing Dobrynin of the decisions with respect to the foundry for the Kama River Project. I told him that the decision had been favorable and amounted to about $170 million. Dobrynin asked what that meant for the rest of the Kama River Project, and I replied that we needed another four to six weeks to make up our mind. Dobrynin then said, in the usual ungenerous Soviet way, that he hoped we realized the foundry had already been taken for granted in Moscow. I said that that was their problem; my problem was to inform them of the decisions we had made, and considering that it was a unilateral American gesture for which we didn't ask reciprocity, it didn't make any difference whether it had been taken for granted or not. Dobrynin then changed tack and rather effusively thanked us for the very positive steps that had been taken on trade since the SALT agreement."
Kissinger forwarded the memorandum of his July 29 conversation to the President under cover of an August 9 memorandum. (National Archives, Nixon Presidential Materials, NSC Files, President's Trip Files, Box 492, Dobrynin/HAK 1971, Volume 7, Part 2)
345. Action Memorandum From Richard T. Kennedy and Robert Hormats of the National Security Council Staff to the President's Assistant for National Security Affairs (Kissinger)/1/
Washington, August 3, 1971.
/1/Source: National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 218, CIEP. Secret.
We have been advised that Peterson may wish to discuss with you:
--The Kama River Project
1. Kama River
You have a memorandum for the President on the subject (copy attached at Tab A)./2/ Secretary Stans has proposed that the President authorize approval of three pending applications for participation in the Foundry Plant in addition to the application of Mack Trucks for participation in the Production Facility.
/2/See Document 343 and footnote 1 thereto.
Mack Trucks has informed Commerce that it hopes the US Government will give early favorable consideration to its application ($750 million technical services and equipment). The other three applications for participation in the foundry are:
--The Swindell/Dressler Company for $13.5 million of technical services. The company claims it has a firm offer from the Soviets, and it expects a follow-on order for $20 million of equipment. Swindell/
Dressler is at Pittsburgh.
--The C.E. Cast Division of Combustion Engineering, Inc. for $37 million of automatic molding equipment and core making machines. The Cast Division is at Pittsburgh but Combustion Engineering has plants in Massachusetts, New Jersey, Texas, Connecticut, New York, Ohio, Kansas, Illinois, Florida, Rhode Island and Oklahoma.
--The Jervis B. Webb Company for $125 million of conveyors and other foundry equipment. Webb is at Detroit, but it also has plants at Avon Lake, Ohio, Cohasset, Mass., and Boyne City, Michigan. These applications are all partially competitive with each other, and consequently if approved would result in exports of less than their total combined value.
If we approve the three licenses for the foundry and not for Mack Truck we will have a public relations problem of "divisional company treatment." The question is how much can we go ahead and authorize in terms of its effect as a "signal" to the Russians?
2. East-West Trade
Peterson may propose asking Commerce to prepare a paper on this subject concerning bringing our unilateral control list down to the international COCOM levels. A talker on this subject is at Tab B./3/
[Omitted here is section 3 with two paragraphs on Japan. The first deals with textiles and possible complications flowing from the China initiative. The second pertains to the August 6 SRG meeting on Japan.]
/3/Not printed. The paper at Tab B is based on Document 337 and concludes with a long paragraph on COCOM parity and COCOM lists.
346. Memorandum From the President's Assistant for National Security Affairs (Kissinger) to Secretary of Commerce Stans/1/
Washington, August 5, 1971.
/1/Source: National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 213, Commerce, Volume II 1971. Confidential. Copies were sent to the Secretaries of State and Defense. A typewritten note at the bottom of the page indicates the memorandum was sent to the outside recipients on August 5 and that copies went to Davis, Kennedy, Hormats, and Sonnenfeldt at the NSC.
The President has decided that you should grant the three pending applications by U.S. firms for participation in the construction of the Kama River truck foundry: Swindell-Dressler for $13.5 million; C.E. Cast for $37 million; and Jervis B. Webb for $125 million. Announcement of the approvals should be made in the usual routine fashion without special fanfare.
Questions may be asked on why we have not approved the Mack Truck application, or whether approval of these three foundry licenses signifies blanket government approval of U.S. participation in all aspects of the Kama River project. Government spokesmen should respond that today's decision does not signify blanket approval of U.S. participation. The decision was made after considering the national security and commercial aspects of each detailed application. Future applications will be considered on the same detailed basis. We have not yet reached a decision on the Mack Truck application, which involves a broader participation in the Kama River project than the three foundry applications approved today.
Future U.S. applications for participation in the Kama River proj-ect, including the foundry plant, should be referred to the White House./2/
/2/In the July 28 draft of this memorandum by Johnston (see footnote 1, Document 343), this read "President" instead of "White House." In his July 28 memorandum to Haig transmitting his draft, Johnston wrote: "By asking that the President approve each application, we are not just adopting a piecemeal approach but an individual company approach. As soon as our general relations with the USSR allow us to adopt some more abstract definition of our participation, i.e., the foundry, we should do so to reduce the awkwardness of having the President decide on specific firms in particular locations."
Henry A. Kissinger
347. Editorial Note
Soviet Foreign Minister Gromyko met with President Nixon in the Oval Office from 3 to 4:30 p.m. on September 29, 1971. The President was accompanied by Secretary of State Rogers and Henry Kissinger; Gromyko by Ambassador Dobrynin. During their discussion the principals touched on trade-related matters. During his opening discussion of bilateral relations, Gromyko said there were certain signs, some barely discernible, that bilateral economic ties were developing favorably. Gromyko said the position of the U.S. Government in this regard was not clear to the Soviet side, and requested the President's comments on the subject, "being aware, Mr. Gromyko hoped, of its full significance for the relations between our two countries."
In his reply the President said: "With reference to trade, the Foreign Minister would recall that last year the President had said this was an area where there were great possibilities for progress. Just this week he had approved the $200 million Kama River project, a sum that brought the total up to $400 million. It was his view that trade was in the interests of both our countries and when we made efforts to expand it, we were really acting in our own selfish interest. American businessmen were interested in greater trade between us and indeed, this was an area where reduced tensions between us would pay the greatest dividends. It was something the Soviet side wanted and so did we. The Minister would find us receptive to any initiative in this respect."
As the meeting concluded, Gromyko returned to economic relations, noted the President's remarks, and said he "wanted to propose that the President send some representative he considers appropriate to Moscow for the purpose of exchanging views on this subject." The President said he had this in mind; there were several officials who wanted to go and he would have to select the right person. The President concluded by saying that one of the obstacles to expanding trade was the war in Southeast Asia, which was winding down. "As it ended, some of the technical and political objections to expanded trade with the Soviet Union which were being raised in this country would be removed. Once the war ended, all sorts of doors would be opened. He did not expect Mr. Gromyko to comment at this time, but wanted him to know the U.S. position." The 12-page memorandum of their conversation is in the National Archives, Nixon Presidential Materials, NSC Files, President's Trip Files, Box 492, Dobrynin/HAK 1971, Volume 7, Part 1.
Henry Kissinger met with Soviet Ambassador Dobrynin on October 4 at 3 p.m. in the White House Map Room. His memorandum of the conversation reads in part: "Dobrynin remarked that the Soviet Union was very eager to start the trade negotiations that Gromyko had mentioned to the President. I said we had not yet decided whether to send Secretary Stans or Peter Peterson, but in any event we would send somebody with a very wide charter and with a constructive attitude. It was not clear, however, what the Soviet Union was prepared to discuss. Dobrynin said the Soviet Union was prepared to discuss all the issues, that is, long-range economic policy including possibly Most-Favored-Nation status, and it was prepared to settle some of the outstanding American claims including some going back to World War II. I said we would be in touch with the Soviet Union by the end of October." (Ibid.)
348. Editorial Note
Pursuant to the President's September 29, 1971, meeting with Foreign Minister Gromyko (see Document 347), Secretary of Commerce Stans traveled to the Soviet Union in late November 1971, to discuss trade-related matters with Soviet officials. He stopped in Stockholm en route to Moscow and in Warsaw during his return travel to Washington.
In preparation for Stans' trip, on November 11 Helmut Sonnenfeldt sent Henry Kissinger a memorandum regarding Kissinger's scheduled meeting with Stans the next day, and on November 15 Kissinger sent the President a shorter version and talking points for his meeting with Stans that day. Both Sonnenfeldt's and Kissinger's memoranda noted that the purpose of Stans' visit was to explore the expansion of commercial relations but not to make specific commitments. Concerning Stans' desire to have approval of pending export license applications related to the Kama River project before departing for the Soviet Union, Sonnenfeldt called Kissinger's attention to the fact that the Defense Department and the AEC were not objecting to approval.
Sonnenfeldt also commented on Stans' desire to carry Presidential letters to the heads of state in the countries he would visit. Letters for Stans' visits were prepared, and in his November 15 memorandum to the President, Kissinger characterized the letter to Kosygin as "warm and positive." Letters for Stans' visits to Moscow and Warsaw were signed by the President. A letter for Swedish Prime Minister Olaf Palme was not approved, and the talking point Kissinger provided the President for Stans' Stockholm stopover noted that "he should avoid political subjects and confine any public statements strictly to economic relations." The talking point for Warsaw noted: "He can hold out prospect of gradually improving economic relations; Romania should stay well ahead of Poland in our initiatives." Both memoranda are in the National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 213, Commerce Volume II 1971. The President met with Stans, Secretary Rogers, and Alexander Haig from 5:20 to 5:55 p.m. on November 15. The meeting included a brief photo opportunity. (Ibid., White House Central Files, President's Daily Diary) A transcript of a tape recording of this meeting is scheduled publication in Foreign Relations, 1969-1976, Moscow Summit, 1971-1972.
On November 15 Kissinger sent Stans a memorandum regarding export license applications for the Kama River project. Kissinger indicated that the President had approved the Commerce recommendations, subject to the conditions governing the actual export. Kissinger reminded Stans that for foreign policy reasons future export license applications for the Kama River project should continue to be referred to the White House. (Ibid., NSC Files, Agency Files, Box 213, Commerce Volume II 1971)
349. Telegram From the Embassy in the Soviet Union to the Department of State/1/
Moscow, November 20, 1971, 1330Z.
/1/Source: National Archives, RG 59, S/S Files: Lot 73 D 153, Morning Summaries, August 25-December 31, 1971. Secret; Exdis.
8649. Stansto 05. Department pass to White House, Dept pass Commerce. Subject: Secretary Stans' meeting with Kosygin, November 20.
1. Major development in full, friendly three-hour twenty minute talk with Kosygin latter expressed strong desire for greatly enlarged commercial relations with US and made expected pleas for end of US "discrimination" against USSR in economic matters./2/ He avoided other contentious matters. No specific political matter mentioned.
/2/During Kissinger's dinner conversation with Dobrynin at the Soviet Embassy on November 18, the two briefly discussed Stans' visit. Dobrynin asked if there were any possibility for most-favored-nation treatment. Kissinger replied that MFN might be possible if the May 1972 Summit proved successful. (National Archives, Nixon Presidential Materials, NSC Files, President's Trip Files, Box 492, Dobrynin/HAK 1971, Volume 8)
2. Stressing that Stans' visit should leave "notable trace" for President's visit, Kosygin proposed exchange of aide-memoires in which two sides would envisage setting up four expert working groups to consider elements of a new economic relationship./3/ These would draw up arrangements and propositions in 3 and 4 months which might be signed before or at Summit and announced at that time. Aide-memoires, Kosygin twice stressed, would not imply legal or legislative commitments.
/3/In his briefing memorandum for Kissinger's November 12 meeting with Stans (see Document 348), Sonnefeldt suggested that if the Soviets wanted a final communiqu Kissinger should not object to a general one, but that in keeping with the nature of the visit there should be no effort to develop agreed language on specific issues.
3. Experts would deal with
(1) General legal/legislative issues such as MFN.
(2) Various financial issues.
(3) "Pure trade," i.e. all commodities other than "equipment," which presents more complex problems. (Kosygin subsequently clarified that "equipment" also included in trade.)
(4) General economic ties such as joint development of Soviet natural resources and major manufacturing projects, also schemes involving third country marketing.
4. Kosygin suggested experts could meet in Soviet Union and US and he himself prepared to meet them from time to time to help move matters along and same might be done on US side.
5. Stans indicated interest but reserved specific response pending further discussions with Patolichev. Indicated desire to work with Patolichev on aide-memoire idea and go as far as we able to at this time.
6. Kosygin later suggested adding experts group on science and technology.
7. Rest of discussion ranged widely over economic issues. Specific item of interest was Kosygin's reference to Soviet interest in five-year agreement to buy 2-3 million tons of corn per year provided credit available. Also suggested possibility of immediate order for synthetic leather technology.
8. Stans noted interrelationship between progress in political and economic relations and need for US public opinion to be sympathetic to improved economic relations. Kosygin said political relations should be even better by time of Summit. On basis of own experience he thought most political and business circles in US now oppose tensions and confrontations, though some probably will always exist who advocate tension. Kosygin spoke warmly of President's letter and forthcoming meeting with him./4/
/4/On November 20 A. Denis Clift sent Kissinger a memorandum bringing this telegram to his attention and recommending he send an information memorandum to the President that summarized its contents, which he attached. Kissinger signed the memorandum to the President on November 22 and it bears a handwritten notation that it was seen by the President. On Clift's November 20 memorandum Kissinger wrote: "Instruct Stans to reserve final decisions to Washington." Pursuant to that instruction, on November 22 Clift sent a memorandum marked "Very Urgent Action" to Haig recommending he send a message to the State Department for transmission to the Embassy in Moscow. On November 26 Haig sent the Department the following message from Kissinger to Stans requesting it be sent to Moscow in response to telegram 8649: "The report of your conversation with Chairman Kosygin has been reviewed by the President with appreciation. As to specifics of program outlined by Kosygin and other proposals Soviets may make during course of your visit, President prefers to reserve final decisions until after you have returned to Washington. He wishes to review substantive findings of your mission in their entirety." (National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 213, Commerce, Volume II 1971)
9. Full report follows./5/
350. Telegram From the Embassy in the Soviet Union to the Department of State/1/
Moscow, November 25, 1971, 2010Z.
/1/Source: National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 213, Commerce Volume II 1971. Secret; Priority; Limdis. The copy of the telegram printed here incorrectly identifies it as telegram 6231; the copy in the Department of State files identifies it as telegram 8778. (Ibid., RG 59, Central Files 1970-73, POL 7 US/STANS)
6231. Stansto 14. Dept pass White House and Commerce. Subject: Secy Stans presentation re status of talks as of November 25 at a meeting with Patolichev. Sec Stans summarized his understandings of the Soviet position to Min Patolichev as follows:
1. The Soviet want (A) credit for imports (B) MFN for exports.
2. Question of export controls is for unilateral action by the US and we are moving as rapidly as possible to reduce lists.
3. Soviets want to buy wide range of goods from US if there is credit, including (A) a long list of equipment and technology items supplied by the Ministry of Petroleum and Petrochemicals, and (B) the purchase of two to three million tons of corn a year for 5 years, as mentioned by Kosygin.
4. Soviets want US participation in financing of major projects involving (A) natural resources and (B) manufacturing plants. Natural resources could involve credit for equipment plus long-term contracts. In regard to manufacturing plants, the US would supply equipment, technology, etc., with Soviet payment in products or through credit.
5. Soviet State Committee on Science and Technology is interested in licensing arrangements to acquire US technology and in joint research on scientific and technological matters.
6. Soviet Gov't is willing to extend credits for sales to the US on reciprocal terms.
7. The Soviets would like to have all relative elements put together in a formal economic agreement.
Sec Stans then stated the United States position as follows:
8. There is no reason for participatory investment transactions to be delayed pending government action since they involve private parties. But USG will attempt to interest US firms to do this as soon as Stans returns to Washington. After the first one or two transactions a negotiation pattern will develop that will make later transactions simpler.
9. All Soviet views presented during talks so far are closely interconnected. They all turn on non-discrimination and reciprocity. Consequently instead of the four or five working groups proposed by Kosygin Stans would propose one working group which could from time-to-time be subdivided to deal with various topics.
10. The kinds of discussion concerning science and technology would probably be quite different from trade matters. Consequently it would be desirable later to have a separate group on science and technology.
11. The Soviets should understand that some of the matters under consideration could be worked out directly between the US Commerce Dept and Soviet Foreign Trade Ministry. Others, however, require action by the President or by Congress and this will involve different time frames.
12. An important part of ultimate arrangements is to find ways in the Soviet Union to accommodate the needs of American firms for facilities such as offices, living quarters, communications and travel.
13. In time there could be a reciprocal understanding to create a Soviet bank in the US and perhaps one or more US banks in the Soviet Union to facilitate trade arrangements.
14. Other subjects to be explored from time-to-time could include reduction of travel restriction and resolution of shipping problems such as loading and unloading ships.
15. As part of the elimination of obstacles to trade it will be important to resume negotiations on Lend-Lease. This is essential step in order that US public and Congress will accept the major initiatives we want to pursue.
16. As time goes on we could discuss other cooperative matters and ways of avoiding future differences of opinion in economic matters and consider setting up means for arbitration of disputes.
17. On the basis of the foregoing points Stans intends next Tuesday to present to Patolichev letter or memo reciting above information and proposing creation at this time of a joint working group between Dept of Commerce and Soviet Ministry of Foreign Trade. This group would deal with trade and investment matters within the jurisdiction of the Secretary of Commerce. After his return to Washington Stans would consult with the President and also with other agencies on those matters that fall within their responsibilities and competence, e.g., finance/credit and MFN.
18. Stans concluded presentation by stating that the foregoing followed Kosygin's suggestions to the extent that Stans has authority at this time while other matters would be brought up upon his return to Washington.
19. Patolichev agreed with Stans' presentation of the Soviet position and expressed his understanding of the United States position. He said he would be pleased to accept a memorandum along these lines.
351. Information Memorandum From Helmut Sonnenfeldt of the National Security Council Staff to the President's Assistant for National Security Affairs (Kissinger)/1/
Washington, November 29, 1971.
/1/Source: National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 213, Commerce, Volume II 1971. Secret; Sensitive; Eyes Only. There is no indication that Kissinger saw the memorandum.
This is a brief account of the way in which Stans' response to Kosygin's proposal for the establishment of working groups evolved. It is a good example of what happens to American negotiators under the pressure of atmosphere, the need to be successful and domestic considerations.
After Kosygin had first advanced his proposal that the Stans trip leave a "concrete trace" by an exchange of aides-memoires which would set up four working groups to develop "propositions and arrangements" in time for the May summit,/2/ I slipped Stans a note with my suggested response. This said that Stans should say (a) Kosygin's proposal was positive and interesting, and (b) Stans would discuss it with the President upon his return and there would then be a response. When Stans spoke next, he said that Kosygin's proposal was in the spirit of the mission but that he would like to think about it and delay a response until there had been a chance to explore the detailed implications with Foreign Trade Minister Patolichev the following week. (I felt this was tactically a better line than I had suggested.)
/2/See Document 349.
Kosygin then hit Stans twice more with his proposal, stressing that the exchange of notes would not in any way constitute a commitment to take legally binding actions. He added as an "afterthought" that there might be a fifth group on science and technology. With a psychological subtlety which he has employed in the past (notably with Harriman in 1965), Kosygin interspersed his pitches with rapid-fire changes of pace of a personal character (how the Russians brew tea in samovars--he would give Stans one as a present--how glorious the climate of Georgia is; how strenuous Stans' trip must have been; would Stans like to be the first American to sit on the floor of the Supreme Soviet when Kosygin spoke the following Wednesday; incidentally, Kosygin would be seeing 300 Americans from Business International Tuesday after next and tell them exactly what he told Stans).
When Stans next spoke he said that he could agree to the idea of exchanging some document at the end of his mission and that he would work with Patolichev as far as he could on setting up the follow-on working groups.
At lunch afterwards at Spaso (bugged) just before Stans took off for Leningrad, I told him that we should take the utmost care not to hem in the President on MFN and EXIM credits since these were exclusively in the President's domain as far as any initiatives were concerned and that Stans should concentrate in Moscow on exploring all the practical problems of increased trade, irrespective of how the mission would be concluded.
When Stans got back from his weekend in Leningrad we talked alone in a secure room. I said his objective should be to reassure the Soviets that we were seriously interested in improving trade relations and that they could be sure that after he returned to Washington he would report fully to the President so that we could then move forward in a constructive way. He indicated that he was thinking in terms of offering follow-on activities for which he, as Secretary of Commerce, already had a Charter while leaving other issues to Presidential determination. He also said that he was thinking of writing a personal letter to Patolichev at the end giving his understanding of what had been discussed. I said as long as this was personal and made no operational commitments it might be a good way to finesse the Kosygin proposal for an exchange of notes.
The meeting with Patolichev that day was confined to discussion of practical problems.
At the next meeting with Patolichev,/3/ Stans then made a very orderly presentation reviewing the whole course of the mission up to that point. But he went beyond his script in saying that (a) he would write a letter, (b) that he could agree to a single follow-on group between his Department and the Soviet Foreign Trade Ministry to deal with matters within Commerce's jurisdiction. He also mentioned incidentally that we would be gradually removing the remainder of the items on the export control list (except for purely military items) and that US EXIM credits were not excluded at some point. (He based this last on what he said the President told him before he left. I was not present at that meeting but Al Haig was./4/ Scott had earlier told a group of Soviet Deputy Foreign Trade Ministers that the more contracts the Soviets offered American business the greater would be the pressure on the President to move on EXIM credits and this was what we all wanted.) Patolichev said that Stans' proposal was reasonable, that the Soviets would like to see a draft of the proposed letter and that they in turn would give Stans a brief draft of a public communiqué listing the meetings Stans had had in Moscow and making some general statements about the visit. Stans agreed.
/3/Presumably the meeting on November 25; see Document 350.
/4/Stans met with the President on November 15; see Document 348.
On returning to the Embassy, I immediately dictated a summary of Stans' presentation for cabling back to Washington in the hope that it would elicit an authoritative instruction from here for the last round of Stans' talks after his return from the Caucasus. This, with some additions by Stans, was sent back here on Friday/5/ after Stans had left for Tbilisi.
Scott, meanwhile, had dictated a first draft of Stans' proposed letter and left a copy with Beam. I went over it with Beam and Klosson and told them that they must tell Stans to remove all references in it to the "US Government" and insist that it be written in the first person and sent back here for comment along with the Soviet draft communiqué.
Also, before leaving Stans had a one hour backgrounder with the US press. The best version of it appeared in the New York Times on Saturday./6/ I felt it was a good job for the most part but became too specific in disclosing his intentions for the end of the talks. You should know, however, that throughout the stay, Stans was under repeated pressure from Klein's office to make news. They urged him to have two press conferences (another before he leaves Wednesday)/7/ and to arrange for a US TV appearance when he gets back.
/6/November 27. The story is on the front page.
It must also be said that Stans throughout operated in the keen awareness that US business is extremely anxious for Soviet contracts and that Kosygin's offer of grain purchases up to 2 billion dollars a year (on credit) could be of crucial political importance on the farm states next year.
I think when all is said and done, Stans avoided concretely committing the President; and with one major exception (the "Watershed" comment to the press)/8/ confined his remarks to economic matters. On the other hand, his mission has obviously generated enormous momentum to move ahead in trade matters and does create implied commitments--both to the Soviets and the American business community--that (1) we will continue to liberalize export controls, and (2) seriously consider and perhaps grant in the next several months EXIM credits and guarantees. He is also committed to some form of follow-on to his trip, though for now only on matters within the jurisdiction of Commerce; and that this work will produce some concrete results by the time of the summit.
/8/As quoted in The New York Times, Stans said that his meetings with Kosygin and Soviet Ministers left him with the feeling that "a watershed had been created in relations with the Soviet Union." The Times story also noted that Stans' visit was the first by a member of the Nixon Cabinet to the Soviet Union.
He is less committed, though not excluding it, on MFN and on a possible umbrella trade agreement (for which the Soviets are very anxious). He also showed sympathy, but without commitment, to Kirillin's proposal for a formal agreement on scientific and technological cooperation.
Stans did an effective job in impressing on the Soviets the need for better facilities for US businessmen.
He also made a cogent statement on the need for trade to be based on a constructive political relationship (no contradiction from the Soviets), but diluted it in public with clichés about how trade will breed understanding which "diplomats" are unable to produce.
352. Memorandum for the President's File by the President's Deputy Assistant for National Security Affairs (Haig)/1/
/1/Source: National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 213, Commerce, Volume II 1971. Confidential. The meeting lasted from 3:12 to 4:15 p.m. and included a brief press opportunity. Kissinger and Ziegler were also present during the closing minutes of the meeting. (Ibid., White House Central Files, President's Daily Diary) A December 6 memorandum from Sonnenfeldt to Kissinger transmitted a briefing paper and talking points for the President's use in his meeting with Stans. Sonnenfeldt called Kissinger's attention to the section of the talking points urging the President to restrain Stans' optimism. A stamp on Kissinger's December 7 memorandum to the President indicates the President saw it.
The President met with Secretary Stans to hear the Secretary's report on his just-completed visit to the Soviet Union and Poland.
Secretary Stans, summarizing his written report, told the President that he had gone to the Soviet Union with the objective of establishing working groups to develop in more detail the means and forms of cooperation with the USSR on trade. His complete report would be forwarded to the President through Dr. Kissinger and Mr. Peterson,/2/ but he wished to touch upon the following highlights:
/2/No written report on Stans' visit to the Soviet Union was found. On February 2, 1972, Stans sent Kissinger a copy of a report he had submitted to the Secretary of State on his December 1-3, 1971, visit to Poland. (Ibid., NSC Files, Agency Files, Box 214, Commerce, Volume III January-June, 1971)
--The Soviets anticipate $2 billion of trade with the United States by 1975, and the Polish government anticipates $300 million in the same timeframe.
--The Soviets hope to complete a five-year grain arrangement with the United States.
--The Secretary highlighted the following impressions of the Soviet economy: (1) a critical shortage of housing; (2) a few shortages of consumer goods; (3) a general impression that the Soviets were a generation behind the United States in industrial advances; (4) a distinct inferiority complex among the Soviet leaders with respect to their industrial development; (5) a Soviet compulsion to play the big-company game in their future industrial development; (6) a distinct "Avis" attitude in the Soviet demeanor.
--The Soviets are especially interested in achieving Most-Favored-Nation status with the United States. They are also interested in additional credits, relaxation of export controls, completion of the trade agreement with the United States, and an agreement for scientific and technological cooperation and space cooperation.
The Secretary commented at some length on his discussions with Kosygin, whom he described as an intelligent, cordial, and extremely capable bureaucrat. The Secretary emphasized the importance of export-import credits for the Soviet Union, as a means of greatly enhancing our ability to expand US-Soviet trade.
President Nixon thanked Secretary Stans for his interesting report and for undertaking his trade mission to the USSR. He pointed out to the Secretary that it was essential that the U.S. attitude with respect to increasing trade with the Soviet Union be governed completely by the state of our political relations. The increasing tensions in South Asia would be an important factor in this respect. He instructed Secretary Stans to provide to General Haig a copy of the proposed talking points which the Secretary would be using in a press conference in the near future covering his impressions of his trip./3/
/3/On December 7 Stans sent Haig a memorandum to which he attached the 37-page transcript of his December 6 U.S. News and World Report interview, which he said was indicative of the approach he would take. He would avoid any discussion of political relations, estimates of potential dollar amounts of trade that might materialize, and compliments to the Soviet Government other than for the hospitality accorded him and his party. Stans indicated he would feel free to discuss specific interests of the two countries, including the Soviet interest in MFN treatment and the relaxation of other American discriminations. Among the points in Haig's December 8 reply was an admonition against accepting the Soviet "discrimination" term (see Document 349). Haig noted that "what is involved are measures undertaken in the political circumstances of the past which can be revised as these circumstances change." Haig continued: "in discussing MFN and Government credit facilities, it should be made clear that these matters must be considered by the President in light of a whole range of factors, including political ones. You should not say anything that creates a presumption of early Presidential decisions or initiatives in these matters." (National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 213, Commerce, Volume II 1971)
The Secretary noted that he had already given an interview to U.S. News and World Report. The President instructed General Haig to get a copy of the transcript to insure that it was consistent with the current state of political relations between the two countries./4/
/4/An undated note by John Scali on top of his copy of the transcript of Stans' interview reads: "General Haig: It seems to me that Stans discloses almost everything that the Russians asked for and thus builds up public pressure for acceptance of their positions. I seriously question whether he should in this interview be permitted to spill all of this. I have outlined the sections that I have the most serious questions about but undoubtedly Hal can find even more. I would strongly recommend that we get him to knock out these areas and if U.S. News and World Report objects, tell them to knock out the interview completely." (Ibid.) On December 8 Haig sent Stans a memorandum to which he attached recommended modifications in the interview. (Ibid.) Stans' interview is in the December 20, 1971, issue of U.S. News and World Report, pp. 56-63.
The President again thanked the Secretary for his interesting report, and the meeting concluded./5/
/5/Documentation on the discussions leading up to, during, and after the U.S.-Soviet Summit held May 22-30, 1972, in Moscow, at which President Nixon and General Secretary Brezhnev considered a wide range of economic issues, is scheduled for publication in Foreign Relations, 1969-1976, Moscow Summit, 1971-1972.
353. Memorandum From the Staff Director of the National Security Council Under Secretaries Committee (Hartman) to the Under Secretary of State (Irwin)/1/
Washington, January 7, 1972.
/1/Source: National Archives, RG 59, S/S Files: Lot 83 D 276, NSC-U/DM 60D. Secret. Drafted by J.K. Wilhelm (S/PC) and cleared in EA by Ambassador Brown.
The Memorandum to the President on China trade and travel/2/ has been an exceptionally difficult document to prepare. Widely divergent and often parochial viewpoints were expressed and passionately defended. The objective in many cases was to close off certain Presidential options. We had to resist this if we were to respond to the mandate.
/2/Not printed; it is an early draft of Document 354.
As the time for the President's departure to Peking drew closer, it became clear that all of the divergent viewpoints could not be reconciled, and that if a paper was to be presented, a technique would have to be established for the presentation of diverging viewpoints which was accurate and fair. To accomplish this, it was agreed by the drafting committee (with Mr. Mountain from DOD/ISA dissenting) that where there was a dissent the text of the memorandum would reflect the majority viewpoint and the dissent would be noted in a footnote. The dissenting agency was in every instance given full autonomy in the wording of its footnote. This technique was essential because the DOD representative insisted upon incorporating his views at length and showed no disposition whatever to negotiate their wording in order to make them acceptable to the rest of the drafting committee. Mr. Hormats of the NSC Staff was one of the conferees concurring in this approach.
Careful consideration has been given to Secretary Laird's request (Tab B) for the incorporation of the footnotes in the text./3/ I have severe doubts as to our ability to accomplish this. DOD has consistently refused to allow any rewording of its positions, and the other participating agencies have simply found DOD's wording unacceptable. If we were now to incorporate such wording, we would have to resubmit the entire text to all original addressees for concurrence. I frankly do not believe that such concurrence would be forthcoming, and we would find that we had gone full circle to arrive at our original impasse.
/3/In his January 4 memorandum to Irwin, not printed, Laird generally concurred with the draft paper but thought placing differing views in footnotes and "further disassociating them from the text by moving them to the end of each section" did "not provide a balanced presentation of opposing views." He recommended revising the format before submitting the paper to the President.
Even if the small probability of an agreed text were realized, the delay would mean the text would not reach the White House in time to be useful. The DOD clearance process is exceedingly cumbersome; witness the fact that the current document was sent to them for clearance on December 18, 1971 after DOD had promised to get a clearance by Christmas. The clearance did not in fact arrive until three weeks later. The NSC staff has now requested this paper by January 11.
For all of these reasons, I believe this document with all of its esthetic defects and tortured concurrence be forwarded, and that you therefore sign the transmittal at Tab A, and the report at Tab B./4/
/4/The reference to Tab B is an apparent error, because both Irwin's transmittal memorandum and the report are at Tab A. Tab B is Secretary Laird's memorandum. Also attached is a Tab C, an undated memorandum from Under Secretary of Commerce Lynn to Irwin, expressing pleasure at the inclusion in the report of Commerce Department revisions, requesting some further organizational changes, and urging that the United States should "inform the PRC immediately of our LTA [Long-term Textile Agreement] obligations, in order to preclude an unusually large volume of textile imports and the difficult position in which this would place the Administration." Attached to Lynn's memorandum is a December 21 memorandum explaining in detail the Commerce Department positions on these matters.
354. Memorandum From the Chairman of the National Security Council Under Secretaries Committee (Irwin) to President Nixon/1/
Washington, January 13, 1972.
/1/Source: National Archives, RG 59, S/S Files: Lot 83 D 276, NSC-U/DM 60D. Secret. A January 13 transmittal memorandum from Hartman to the Deputy Secretary of Defense; the President's Assistant for National Security Affairs; the President's Assistant for International Economic Affairs; the Director of Central Intelligence; the Chairman of the Joint Chiefs of Staff; the Under Secretaries of the Treasury, Commerce, Labor, Transportation, and Agriculture; the Deputy Attorney General; the Director of the U.S. Information Agency; and the Special Trade Representative, is ibid. Regarding the preparation and clearance of Irwin's memorandum, see Document 353.
The memorandum and study appended at Tab A respond to your request of June 9, 1971./2/ They were delayed in preparation, with the agreement of the NSC Staff, to allow further time for assessment of U.S. initiatives vis-à-vis the People's Republic of China, and in part because of the difficulties encountered in the reconciliation of widely divergent viewpoints.
The most important problem dealt with is the question of a) whether the PRC should be afforded equality with the USSR in respect to commodities and products of technology available for export to them under general license and b) if so, when these actions should be accomplished. On point a) the majority, including State and Commerce, believes that full equality should be afforded as part of a general process of bringing our trade policies with the PRC and the USSR into alignment. Defense objects on the grounds that different levels of military, industrial and technological development of the PRC require different criteria for decontrolling items for general license export to the PRC until such time as experience provides a basis for bringing our trade policies in closer alignment. On point b) the majority, including Defense and Commerce, believes that the principles of gradualness and reciprocity should be given full weight. The Department of State believes that the earlier and more thoroughly our policies on trade with the PRC are brought into line with those toward the USSR, the greater the likelihood of favorable impact upon US-PRC relations. State therefore favors early implementation of the recommendations in this paper.
The recommendations of the Committee are summarized in my report which is attached. They are more fully described with their relative advantages and disadvantages in Annex A to my report.
Where different viewpoints occurred, the agency dissenting from the majority viewpoint has in each case presented its position in a footnote. Such footnotes express the view of the author agency only. Because of the desire to allow full expression of dissent, and the inability of the drafting committee to accede unanimously to dissenting viewpoints, I believe that the current format of the memorandum is more responsive to your desire to see all the options than any other practical alternative. Accordingly, the suggestion of Secretary Laird to redraft the memorandum (Tab B)/3/ was partly but not wholly accommodated.
/3/See footnote 3, Document 353.
The concurrence of the Department of Commerce which explains its position more fully is appended at Tab C./4/
/4/See footnote 4, Document 353. See also footnote 14 below.
John N. Irwin II
Memorandum From the Chairman of the National Security Council Under Secretaries Committee (Irwin) to President Nixon/5/
Washington, January 13, 1972.
Results of Initial Steps
1. The political climate of US-PRC relations has improved substantially since you announced relaxation of trade and travel restrictions. While this improvement is not necessarily to be attributed directly to US initiatives in the area of trade and travel, they may have made a contribution.
2. There has, however, been no direct positive response from the PRC to US reduction of restrictions upon trade. Specifically, there has been no reciprocal relaxation of the PRC refusal to conduct direct trade with the US. The GRC has unofficially expressed concern about these reductions but its reaction has been very mild.
3. About 180 non-official Americans traveled to the PRC in 1971 after the removal of restrictions upon use of US passports for travel to the PRC./6/
/6/Department of Defense notes that only a very small number of the thousands of applications for visas to the PRC have been approved. Those receiving visas were persons in a position to influence US public opinion: journalists, prominent doctors, people sympathetic to the PRC, representatives of radical minority groups, or relatives of residents or prisoners. Since most of those who have traveled since March 15, 1971 to the PRC would have received validated passports before that date, very little of this travel can be attributed to US relaxation of passport controls. [Footnote in the source text.]
4. The PRC has refused to trade directly, although it has tacitly permitted exporters in third countries to reexport PRC products to the US. It may have purchased negligible amounts of US manufactured goods through third countries.
5. Indirect imports in 1971 may have approached $2 million by October 10, four months after the President announced imports from the PRC would be permitted.
6. Several foreign subsidiaries of American firms were permitted to send non-American representatives to the Canton Fair, but we know of only one American businessman, as such, who was quietly permitted to attend the Canton Fair./7/
/7/Department of Defense notes that the unique place of the Canton Fair and the lack of permission for Americans to attend shows that the meager response to our trade and travel overtures is a matter of deliberate policy and that the PRC for a considerable period of time to come may continue to respond to the US removal of travel and trade restrictions very slowly, if at all. In short, the PRC will attempt to use the US interest in trade and our desire to improve US-PRC relations as a lever with which to extract maximum political and economic concessions. [Footnote in the source text.]
7. We have no information on, nor reason to believe that, changes in regulations on bunkering, remittances, carriage of PRC cargoes, and US-owned foreign-flag ships have had any results.
Results of Review for Expansion of the General License List
We have been unable to reach interagency agreement on expansion of the already substantial general license list for exports to the PRC. The Department of Defense maintains that it is not possible at this time to determine whether the remaining items considered non-strategic for the USSR are also non-strategic for the PRC, and therefore holds that such additional items should be considered only for export under validated license procedures. Departments of Commerce and State feel that it is possible to determine from available information whether such items create an unacceptable security risk and have favored their inclusion in the general license list.
There are three general courses of actions under which the specific further steps recommended below can usefully be grouped. The specific steps recommended are based on our assessment of past results and our estimate of the probable results of further steps. They are:
1. To take no further steps at the present time.
2 . To adopt now all or most of the further steps listed below.
3. To adopt some but not all of the steps listed below and to implement them gradually over a period of time.
Recommendations for Further Steps
The Under Secretaries Committee recommends the following steps for adoption at the appropriate time (dissenting Department's views are noted):/8/
/8/Department of Defense believes that two considerations appear primary to the question of what further steps should be recommended at this time to augment travel and trade with the PRC. These are: (1) how to indicate to the PRC our intention that relaxation of controls on travel and trade proceed on a mutual and reciprocal basis, and (2) how to continue the policy of removal of discriminatory restrictions without affording to the PRC the opportunity to acquire from the US items of strategic value to them which cannot be acquired elsewhere and which their level of technology does not permit them to produce domestically.
The assessment of the results of initial steps in Part I indicates that the PRC has been less than forthcoming in its response to our initial steps. Thus, it would appear tactically prudent for the US to maintain its bargaining position by exercising an equivalent degree of restraint on further relaxation of controls on trade.
Bringing our trade policies with the PRC and the USSR into closer alignment should be our ultimate goal but only after a year or two of experience enables us to determine whether the US national interests would be served by taking further steps to liberalize our export policy toward the PRC. At the present time a differential in levels of control should remain over strategic items for the PRC and the USSR because of their different levels of industrial and technological development.
There should be more evidence of PRC willingness to increase travel and trade and to improve US-PRC relations before implementing the additional steps recommended below. One form this should take would be release by the PRC of the remaining US prisoners now held in Communist China. [Footnote in the source text.]
1. With respect to the general license list of non-strategic exports to the PRC:
/9/Department of Defense objects because it believes the different levels of military, industrial and technological development of the PRC and USSR require that decontrol of items to the PRC be based on a specific determination of their strategic significance to the PRC. The DOD would place on general license all commodities found not to be strategically significant to the PRC. Items not placed on general license can still be exported to the PRC if on the basis of a case-by-case review they are found to be non-strategic. [Footnote in the source text. This footnote setting forth Department of Defense objections was appended to Options A, B, and C. None of the Approve/Disapprove decision options in the paper is checked.]
Afford the PRC complete equality with the USSR both in commodities under general license and technical data regulations by placing the PRC in Country Group Y of the Commodity Control List. (Recommended)
Afford the PRC complete equality with the USSR with respect to all commodities available under general license but separately consider relaxing restrictions on foreign-made products of technical data. (Under this Option the PRC would not be included under Country Group Y.) (Not Pertinent If Option A Approved)
Set the general license list for the PRC at 90% (or some other arbitrary figure) of the present and subsequent general license lists for the USSR. (Not Pertinent If Options A or B approved)
/10/Department of Defense opposes addition of this option on the grounds that it is premature. [Footnote in the source text.]
In conjunction with Options B or C (above) place controls governing export to the PRC of foreign-made products of US technical data on the same level as those governing such exports to the USSR. (Not Pertinent If Option A Approved)
/11/Recommended by the Department of Defense. [Footnote in the source text.]
Continue controls on exports to the PRC at current levels, and consider further relaxation only after reciprocal actions by the PRC are in evidence. (Not Pertinent If Options A, B, C or D are approved)
2. Enhance the possibility of sales of US new and used aircraft to the PRC:
Issue favorable advisory opinions in writing when requested by exporters, concerning sale of US aircraft for PRC civil use. (Recommended)
Continue to inform applicants for advisory opinions that we will only consider requests based on indications of serious interest by the PRC accompanied by necessary data, but that such requests are likely to be approved if the end use is peaceful and the equipment is appropriate.
3. Permit US-flag ships and aircraft to visit the PRC, as well as entry of PRC ships and aircraft into the US. (Recommended)/12/
/12/Department of Defense opposes exercise of this option until such time as we can be assured of some measure of customary protection of US flag ships, aircraft and their personnel. [Footnote in the source text.]
4. Modify Foreign Assets Control regulations applying only to the PRC, but not the USSR:
Abolish Foreign Assets Control regulation requiring US firms in COCOM countries to obtain Treasury License in addition to host country license for the export of strategic goods. (Recommended)/13/
/13/Department of Defense opposes addition of this option on the grounds that it is premature. [Footnote in the source text.]
Abolish additional Foreign Assets Control regulation prohibiting subsidiaries of US firms abroad from exporting foreign technology to the PRC without Treasury License. (Also Recommended)/13/
5. Inform the PRC of our Long Term Arrangement regarding International Trade in Cotton Textiles (LTA) obligations and possibility of restraint action in the event of actual or threatened market disruption. (Recommended)
There are three options as to the timing of informing the PRC, as follows:/14/
/14/The Commerce Department believes that it is imperative that the United States inform the PRC as soon as possible of our LTA obligations and the possibility of restraint action in the event of actual or threatened market disruption. Sufficient information is available to indicate that importers are encouraging the PRC, the world's first or second largest exporter of cotton textiles, to export substantial quantities to the U.S. To wait until after this trade has built up would be academic. Restraint action without prior notice would then be needed if the Administration is to avoid grave problems with our domestic industry and with our bilateral partners to whom we have an equity obligation not to allow unrestrained exports to build up while they are restricted in what they can export to us. Commerce also believes that it would be wrong to wait until direct trade relations are established since it is possible for PRC cotton textiles to be shipped to us through Hong Kong and Canada as the PRC is presently doing.
The Department of State believes that it would be undesirable to contact the PRC on this subject until direct trade relations are established or unless necessitated by substantial shipments which disrupt or threaten market disruption. An earlier approach would simply confuse PRC officials who would probably answer that the PRC does not permit direct shipment of any Chinese goods to the US and cannot therefore bear any responsibility for entry of Chinese textiles into the US. If initiated prematurely, this action might prejudice development of trade in other more desirable fields.
The PRC in any case is very well aware of the existence of US restrictions upon the import of textiles from other countries. The trade knows of the possibility that these regulations may be invoked against PRC, since they have been making inquiries. Pending the decision of the President to notify the PRC directly of the LTA restrictions, the Department of State sees no objection to reminding informally the principal trading companies through which trade in cotton textiles is conducted that the restrictions of the LTA will apply to PRC-origin cotton textiles as well. [Footnote in the source text.]
/15/Recommended by the Department of State. [Footnote in the source text.]
Notify the PRC after direct trade relations are established, or if substantial quantities of PRC textiles arrive in the US.
/16/Recommended by the Department of Commerce. [Footnote in the source text.]
Notify the PRC now.
/17/Recommended by Commerce if Option B not adopted. [Footnote in the source text.]
Notify the PRC shortly after you return from your trip to the PRC.
6. Promote trade.
Quietly extend USG invitations to the PRC to participate in trade fairs. (Recommended)
Encourage exchange of non-governmental/industry trade missions. (Also Recommended)
Encourage private groups to invite the PRC to technical seminars and colloquia. (Also Recommended)
Propose exchange of governmental trade study groups. (Also Recommended)
Propose establishment of reciprocal unofficial commercial offices. (Also Recommended)
7. Propose the settlement of US and PRC private claims through negotiations. (Recommended)
8. Propose reciprocal visits of eminent PRC individuals to the US. (Recommended)
These recommendations, which are discussed in detail in Annex A,/18/ are aimed at bringing our trade policy with the PRC and the USSR into alignment./19/ All options are administrative actions which are within the power of the Executive to approve in accordance with existing law.
/18/Annex A is not printed. It contains eight sections that correspond to the eight "Recommendations for Further Steps" above.
/19/Department of Defense opposes bringing our trade policy with the PRC and the USSR into alignment now, but believes closer alignment should be considered after a year or two of experience provides a basis on which to judge the potential benefits of such an action. [Footnote in the source text.]
Annex B lists without recommendation three areas of possible actions to improve trade relations with the PRC, all of which would require legislative action./20/
Timing. A further question arises as to how and when the approved proposals should be implemented. Each proposed action could be undertaken separately. However, in addition to viewing implementation in the context of the President's visit, we believe that the principles of gradualness and reciprocity should be given full weight./21/ In fact, complete implementation of some proposals is dependent upon PRC willingness to respond.
/21/Department of State believes that the earlier and more thoroughly our policies on trade with the PRC are brought into line with those toward the USSR, the greater likelihood of favorable impact upon US-PRC relations. State therefore favors early implementation of the recommendations in this paper. [Footnote in the source text.]
John N. Irwin II
355. Memorandum From the President's Assistant for International Economic Affairs (Peterson) to the President's Assistant for National Security Affairs (Kissinger)/1/
Washington, January 28, 1972.
/1/Source: National Archives, Nixon Presidential Materials, NSC Files, Subject Files, Box 402, Trade, Volume V 1/72-4/7/73. Secret. Attached to a February 2 memorandum from Holdridge to Kissinger; see footnote 1, Document 356.
I understand that you are about to send to the President the NSC Under Secretaries' Committee Report on Travel and Trade with the PRC./2/ In this connection, I wanted to share with you some of my personal reactions which may be slightly different than what my staff is conveying to yours.
Generally, the problem with the USC Report is that it seems to have been formulated in a political vacuum without regard to the failure of the Chinese to respond positively in the economic arena. You and the President are in a position to make political decisions about this long list of options which, apart from the politics involved, strikes me as fairly sterile in most cases. More specifically, I favor moving on some minor issues at this time but oppose further relaxation of others.
For example, on economic and trade policy grounds, I would normally favor the removal of any discrimination between the treatment of the PRC and USSR in our regulations concerning direct bilateral trade or travel. However, since the major relaxation of last year/3/ has yet to move any direct trade, I would oppose the further relaxation of US trade regulations prior to the President's China trip. My preference is to hold further liberalization against the possibility of later agreement or unilateral action (either during the trip or afterwards)/4/ indicating that the Chinese actually intend to expand direct trade. Before going the whole distance to remove the China differential, we should be assured that there will be tangible results which, among other things, will at least help justify running the alleged security risk which continues to bother Defense.
/3/Probably a reference to the measures announced on June 10, 1971; see Document 333.
/4/President Nixon traveled to the People's Republic of China February 17-28, 1972.
On the other issues under consideration (modification of remaining Foreign Assets Control Regulations and the controls on US firms abroad exporting foreign technology to the PRC), I favor the recommendations of the Under Secretaries' Committee, i.e., that we abolish those controls which continue to require differential treatment by US subsidiaries abroad of exports to the PRC and USSR. I favor this mainly on the grounds that it would remove further irritants in our investment relations with friendly countries, which are more directly at issue here than are our relations with the PRC. Also, as a signal to the PRC of our intent to do something positive, removal of these controls prior to the President's trip might be useful and could help set the stage for more meaningful results during or following the trip on trade and travel matters of direct US-PRC significance.
356. Action Memorandum From the President's Assistant for National Security Affairs (Kissinger) to President Nixon/1/
/1/Source: National Archives, Nixon Presidential Materials, NSC Files, Subject Files, Box 402, Trade, Volume V 1/72-4/7/73. Secret. Attached to a February 2 memorandum from Holdridge to Kissinger recommending he sign the memorandum to the President.
The report (Tab A) by the Under Secretaries' Committee (USC)/2/ indicates the results of your initiatives to augment travel and trade between the PRC and the U.S., and recommends further steps. You may wish to take some such steps prior to your visit to the PRC.
Results of Your Initial Steps
U.S.-PRC atmospherics have improved, due in part to your trade and travel initiatives of last April. Although it has not yet permitted direct trade, Peking has allowed exporters in third countries to re-export Chinese products to the U.S.
Recommendations for Further Steps
The USC recommended a considerable number of further trade modifications, only two of which involve discriminatory treatment between the PRC and USSR and would seem pertinent to your China trip: (a) expansion of the general license list to bring the PRC to the same level as the USSR, and (b) modification of two remaining Foreign Assets Control Regulations which are more restrictive on the PRC than on the USSR. The other options, which need not be considered in advance of the trip, pertain to the sale of aircraft to the PRC, the problem of PRC cotton textile exports to the U.S., the settlement of PRC and U.S. claims against one another, and mutual visitation of ships and aircraft.
During the October visit to Peking, we informed the Chinese that you would unilaterally and unconditionally make a further reduction in the U.S. restrictions on trade with the PRC, and that we would do so by increasing the number of items on our general list of exports to China "up to the limits of the law."/3/ The most likely PRC interpretation of this is that we will place the PRC in the same category as the USSR in terms of items which can be exported directly from the U.S. without a license, or of items made in foreign countries with U.S. technical data.
/3/In his February 2 cover memorandum to Kissinger, Holdridge wrote that Jenkins, at Kissinger's direction, had told this to Hsiung Hsiang-hui, Prime Minister Chou's secretary.
Issue I--Expanding the general list to give the PRC parity with the USSR
A. Afford the PRC complete equality with the USSR both in commodities under general license regulations and, in the export of foreign products made with U.S. technical data, by placing the PRC in the same commodity control list category as the Soviet Union (Country Group Y; it is now in Z). This is the USC recommendation. However, Pete Peterson opposes (Tab B)/4/ until the Chinese demonstrate a desire to begin direct trade.
B. Afford the PRC complete equality with the USSR with respect to all commodities available under general license, but with no change in country group status. This would discriminate against the PRC with regard to foreign products made with U.S. technical data.
C. Set the general license list for the PRC at 90 percent (or some other arbitrary figure) of the present and subsequent USSR list.
D. In conjunction with B or C, remove controls on export to the PRC of foreign goods made with U.S. technical data to put them on the same level as controls governing such exports to the USSR. (Option A would have the effect of doing this as well.)
E. Continue controls on exports to the PRC at current levels and consider further relaxation only after reciprocal actions by the PRC are in evidence. (This is a non-option in terms of what actions should be taken with respect to last October's remarks, but is the only one which Defense supports.)
That you approve Option A. This is the only option we believe is fully consistent with our statement to the PRC in October. We disagree with DOD's objection to Options A-D on strategic grounds, since the PRC can obtain almost all of the goods involved elsewhere./5/
/5/Haig wrote "HK for RN" next to the Approve option.
Issue 2--Modification of Foreign Assets Control Regulations
Abolish Foreign Asset Control Regulations requiring U.S. firms in COCOM countries (Western Europe and Japan) to obtain a Treasury license in addition to host country license for the export of strategic goods to the PRC. (Even without this restriction, the USG can approve the sale of the commodity through the COCOM Committee, but it is an added impediment serving little effective purpose.) This is the USC recommendation--from which DOD dissented on grounds that the move would be premature. Peter Peterson concurs in the USC recommendation.
That you approve the USC recommendation. In addition to giving the PRC parity with the USSR on this second remaining element, the change would also remove the appearance of U.S. interference in the affairs of third countries (NATO allies and Japan)./6/
/6/Haig wrote "HK for RN" next to the Approve option. A February 11 Memorandum for the Record from Department of State Executive Secretary Eliot reported that Haig had called that evening to report the President's approval of the Department's recommendations in the January 13 USC memorandum. Haig noted that a draft press announcement for release on February 14 would be provided the next day for comment. (National Archives, RG 59, S/S Files: Lot 73 D 288, Box 838, NSC Under Secretaries Committee Memoranda, 1971-1972) For text of the statement, see Department of State Bulletin, March 6, 1972, p. 291.
Issue 3--Other USC Recommendations
The remaining USC recommendations pertain to other economic issues in U.S.-PRC relations such as the sale of aircraft to the PRC, the problem of PRC cotton textile exports to the U.S., the settlement of PRC and U.S. claims against one another, and mutual visitation of ships and aircraft, and we believe need not be addressed until after the trip.
That you consider the other USC recommendations after the trip./5/
357. National Security Decision Memorandum 155/1/
Washington, February 17, 1972.
/1/Source: National Archives, RG 59, S/S Files: Lot 83 D 305, NSDM 155. Secret. Copies were sent to the Attorney General and the Director of Central Intelligence.
The President has considered the findings and recommendations forwarded in the report of the Under Secretaries Committee regarding trade and travel relations between the United States and the People's Republic of China./2/ Based on that report he has made the following decisions:/3/
1. The Secretary of Commerce should transfer the People's Republic of China from Country Group Z of the Commodity Control List to Country Group Y.
2. The Secretary of the Treasury should eliminate the Foreign Assets Control requirement that subsidiaries of U.S. firms in COCOM countries obtain a Treasury license in addition to a host country license for the export of strategic goods to the People's Republic of China, and the requirement that subsidiaries of U.S. firms abroad obtain prior Treasury licensing for export of foreign technology to the People's Republic of China.
Additional recommendations contained in the Under Secretaries report are under consideration.
Henry A. Kissinger
358. National Security Decision Memorandum 188/1/
Washington, August 30, 1972.
/1/Source: National Archives, RG 59, S/S Files: Lot 83 D 276, NSC-U/DM 60D. Secret; Nodis; Homer. Copies were sent to the Secretary of Defense and the Director of Central Intelligence.
The President has approved the Under Secretaries Committee recommendation contained in its memorandum of January 13, 1972 concerning the settlement of PRC blocked assets and private claims./2/ Specifically, the President directs:
--That the United States should explore first, with the People's Republic of China, a lump sum settlement of the claims of American citizens for property nationalized by the PRC, to be paid either as a single payment in full or in annual installments over a period of years, in return for which the U.S. would unblock all PRC assets.
--That if the foregoing course proves non-negotiable, the U.S. should propose a settlement under which it would retain the blocked assets now under its control using them to compensate U.S. citizens for properties nationalized by the PRC.
The President has directed that the Secretary of State, in cooperation with the Secretary of the Treasury, should prepare a negotiating scenario based upon the foregoing decision which should be submitted for his approval by September 15, 1972.
Henry A. Kissinger
359. National Security Decision Memorandum 195/1/
Washington, October 30, 1972.
/1/Source: National Archives, RG 59, S/S Files, Lot 83 D 305, NSDM 195. Secret. Copies were sent to the Secretary of Defense, the Director of Central Intelligence, and the President's Assistant for International Economic Affairs.
The President has considered recommendations of the Under Secretaries Committee in its memorandum of January 13, 1972/2/ and decided that Transportation Order T-2 should be amended to permit U.S. flag-vessels and U.S.-registered civil aircraft having a validated license from the Department of Commerce to visit the People's Republic of China. The Department of State should notify U.S. airlines which had previously been granted authority to provide scheduled service to points in the PRC that they should not approach the PRC directly about the establishment of service until the Civil Aeronautics Board has examined the question of the establishment of scheduled service.
Initial announcement of this decision will be made by the White House./3/
/3/The announcement was made on November 22, 1972. See Public Papers of the Presidents of the United States: Richard Nixon, 1972, Appendix B, p. B-19.
Henry A. Kissinger
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