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Document Creation Date: 
December 12, 2016
Document Release Date: 
June 23, 2000
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Publication Date: 
October 9, 1959
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PDF icon CIA-RDP64-00014A000100120004-5.pdf1.15 MB
DEPARTMENT OF STATE INSTRUCTION roved For Release 2001/Q P2 : CIA-RDP64-00014AO00100120004-5 OiaFIOI 1 '.=SE ONLY 80 NO.: ORIGIN E S UBJECT: INFO DCL UP A? TO: A&& AG NUR AIR FE AIM NEA CIA COM C FAB ICA Ia NAVY L SP TAIL Tit M U/IaC U/CEA CA?3151, October 9, 1959 1J. S. Trade P?13_cw; ax-d National Securrit;tr ALL A ERICANN DIPLo ,:A`? IC AND GOT S ULAR POSTS 'p'Il.e i port ancc to our national security- of the administra- tion's liberal trade polic4/ and the adverse security effects of trade restrictions have been the sub, ect of considerable attentio ? in recent months wit!i,'i the GOverr::vnt. The enclosed paper, pre- parec in the Departnent of State as hack :roti nd for iwt?er-departMentel discuss:' ens, is enclosed for 1,j our f,? neral information. "7'rad.e Polic;r- arid ?1a'lio gal ?Sec ,rit j" po,r;er rated Juno h, 1959. State Dept. declossification & release instructions on file O -FI' IAL '.S?; ONLY DRAFTED APPROVED BY: E - C. W. Adair, Jr. CLEARANCES: TO - Mr. Iiefner Approved pr_Fjfrlefg .?001/03/02 : CIA-RDP64-00014AO00100120004-5 .Approved For Release 2001/03/02 : CIA-RDP64-00014AO00100120004-5 fl `A. 1. YEt r OF STATE AND NATIONAL SECURITY June 4, 1959 Approved For Release 2001/03/02 : CIA-RDP64-00014AO00100120004-5 Approved For Release 2001/03/021 CIA-RDP64-00014A000100120004-5 TRADE POLICY AND NATIONAL SECLI"RITY its pec h. nations' interest, to improve the security and well-being of the US and The broad Qbjective of US foreign economic policy is identioal with that of our general foreign policy: to protect and advance the This broad objective of our foreign economic policy has three major components. First, to promote the economic strength of the US, second$ to promote the economic strength of the rest of the free world, and third, to build and -maintain cohesion in the free world. To .(*ieve these objectives we have followed three basic economic I would like to deal first with the general aspects of the problem policiess The expansion of trade; the promotion pf private inveent;' dprovision of mutual assistance. Diring the past 6 years, by building on existing programs and, even more important, by developing new programs designed to meet new needs and changing conditions, there has been created a complex pattern of interrelated programs. Some of them we carry out on our own and others in cooperation with.friendly nations. These programs are well. suited to the proz,otion of our basic objectives. At the present time, however, the achievement of these objectives is endangered from within by the growth of protectionist sentiment and from the outside by the Soviet economic offensive. It, purpose thin morning is to suggest some of the ways in which. protectionism adversely affects our domestic,, economy., our political-economic relations with our allies and therefore our national security. 1 to specific illustrations. Protect,onism has certain recognisable benefits. It can athe assure survival. of a sensitive industry .*iidh might otherwise succumb because of its competitve disadvantages. It chn prdide a blanket for an infant industry during its formative years. 'It can,prevent economic and social dioxuption in a community dependent on a si;,gle industry and without the - resources to develop alternative industries. .In spitof these recognizable advantages, however, there are xie.lat'1vely few people who would contend that protectionism pz'Ovides a bas'is` fair a "c ynamic expanding economy. The reasons are abvio t.,, Protection discourages the development of new products, new methods of prodtiction and distribution, and cost-saving techniques. Pfrtection reduces our ability to compete with otaer industrialized economies. Approved For Release 2001/03/02 : CIA-RDP64-00014AO00100120004-5 Approved For Release 2001/03/02 : CIA-RDP64-00014AO001Q0120004-5 Protectioi contributes to inflation by raising the costs of the products we buy abroad. t i peri .s our export markets by making it more difficult for other countries to earn the dollars they need in order to buy from us. It also endangers those markets by inviting retaliation on the part of other' countries. Protectiopist measures inevitably reduce total US output by preventing the; shift of domestic resources from less efficient to more efficient industries. By lowering our total national product, such mo wilaown our rate of growth and reduce the resources available measures s s slow ty needs, including aid to the less developed countries. Having indicpted the effects of protectionist policy on the domestic economy, I wo d i.ike to indicate briefly the effects on the economies and the etheranob. For example, approximately one-half of everything the Netherlands produces Is shipped abroad. Foreign trade is vitally important to our economy, but even so it oonst .tute,s o 4y 4% of our gross national product. In other major industrial' countries (national onaas product t is'3 to 4 times greater. it is 5 11 .9 as eat; forns such as Belgium, Sweden smaller advanced patio to 9 time" of other countries. relations with those countries. This is true even when the action itself " does not seem important to us Our trade po.icy is of tremendous concern to all. of these countries, first because exports play such a major role in their economies and secondly because the United States is a major mar'cet for their goods. Both of these Feasons explain,why any action by the United States which adversely affects sales of their key products, or threatens those sales, is front page news abroad and has a serious effect on our international I can cite five specific examples of restrictive measures which have adversely eh af affected four important allies. Lead and zinc affecting ad: affecting the IIetherlands, electrical equipment and woolen fabrics affecting the United Kingdom and cotton textiles affecting Japan. In the cage of many less developed countries, one, or a few 2/3 of Chile's copper 1/2 of Cuba's sugar x.14 of Indonesia's rubber 0 of Bolivia's tin over' 1/2 of Brazil. Is coffee ~/5 of Venezuela's oil " 13 of Peru's lead and zinc. Approved For Release 2001/03/02 : CIA-RDP64-00014A000100120004-5 commo ities, comprise the bulk of their exports. For many of these countries the US market is especially important. To illustrate this point, the United States imports Approved For Release 2001/03/02 : CIA-RDP64-00014A000100120004-5 The ability of the less developed countries to sell their products in the United.ctat~s affects their ability to import capital goods and other necessary manufactured products. Therefore, it determines in large measure the basis of their economic growth and their ability to raise standards of living. The promotion of economic growth in the less developed countries is of Course a prime objective of our foreign policy. By this means ,09 hope to help those countries to achieve peace and stability. Unfortunately their economic health can be seriously damaged by US import restrictions. Our import quotas on petroleum,. lead and zinc, and cotton, for example, have had that effect on Mexico, Venezuela, Peru, Indonesia, Egypt, the Sudan and other less developed countries. The Soviet Union, of course, recognizes clearly the major role that trade can play in furthering its objectives. The evidence; e1early shows that friendly countries, when denied.access to our market,.are forced to increase their economic dependence on the Soviet Bloc. As a-specific example, after the Imposition of restrictions against Uruguayan wool tops in 1953, the Soviet Bloc steadily increased its purchases, and as a result It is now t ,e ms,st Important outlet. for Uruguayan wool tops. Recently our countervailing duty on wool tops=was removed.. A;; you knot, our action to impose quotason lead and zinc was followed by violent anti-American reactions i..Peru and there have been sharp reactions in Venezuela to our oil import policy. ]:n assesing where we stand today it is important, of course, to keep the pAA.ture in balance. On the one hand, since :.953 we have pursued an active policy for the promotion of international trade. We have taken ,Part 'In two successful trade conferences in 1955 and 1956. It is true that.many of the tariff concessions we gave at those conferences were su~all amounting to no more than a 15% reduction in the existing duty. Nevertheless imports of the products affected by the concessions were valued at approximately pl billion. P great deal of attention has been ,given to escape clause actions that we have found. it necessary to take in recent years. Unfortunately little account is taken of the applications that were turned down.. Other countries often fail to acknowledge that out of 27 cases in which escape clause action was recommended by the Tariff Commission no action was taken in 19 cases. O;n the, the; side of the balance, there are the various restrictive measures that hake been taken. Xou will note fr9m,tom ebart...that ..since, 153 we have taken restrictive action od 29 commodity groups exported from 45 tree world countries, Approved For Release 2001/03/02 : CIA-RDP64-00014AO00100120004-5 Approved For Release 2001/03/@214: CIA-RDP64-00014AO00100120004-5 ACS N, 'r.AKP N TO REESTRICT IMPORTS SINCE JANUARY 1, 1959 AN C c +1MODITIF,SS AFFECTED Commodities No. of Countries Type of Action* Date of Actio4 Affected {29) Affected 45 Cattle 2 Wool Tops 1 Butter and/or Butter Oil 5 Cheese 8 Dried Milk Products 4 Plaaseed and/or Linseed Oil Peanuts and/or Pea- Almonds 1 CD Tuna anise JL1N 'S6 Woolens Toweling 9 OCT !56 B3eavey Electrical MAR ' S7 Equipment 2 BA Clothespins Il FC NOV 'Si Safety Pins 4 EC NOV !57 Tung; Nuts and Oil 4 22 NOV 157 Thermometers 2 EC APR t58 Small Arms' 7 L JUN ' 58 Long Staple Cotton 4 22 J UL ' S$ Long, oot~ wear' Rubber-soled r 3 L SEP 'S8 'Lead 16 EC OCT '58 Zinc; 15 EC OCT 158 JAN 'S9 e Cast, Cron .3 AU in B irxa 3 Ca AR 156 Bicycles 8 _ C 1 fn OCT !55 I b iYD4- Hardboard 1 r AUG 'S5 Alsa a over JUL Watch Movements 5 Fish sticks 1 L AUG '54 AUG !5h TAR CD 22 22 22 APR '53 MAY 53 / JUL ' 53 JUL 153 JUL !53 JUL '53 JUL '53 (Voluntary' Program Mar ' 54 - Mandatory Program Mar 't S9) 9 N(`A MAR `54 Rye and Aya Flour` 1 ~. APR 54 k C1 1 GEC JUN ! 54 Petroleum nut vu EC > Escape Clause AD - Antid'unping ?- Invocation of Geneva Reservation Bk. - Buy Anerican L - Legislation' NSA - National Security immendment n 22 21 La - Invocation of Trade Agree- 13 '1 - Countervailing Duty ment Reservation CD A ;oyedl r Release 2001/03/02 : CIA-RDP64-00014AO00100120004-5 Approved for tel'ease 2001/03/02: IA-RDP64-00014A000100120004-5 4, sirit>c:,.l,Y izpos:ible to determine precisely how rmich trade ,cct ka, tYso restrictions. However, it has been calculated on s ,. ~ ae te;s t figures available, that is for 1957, the trade ` 4cd y UUpse, eatric Lions represented about ,2.1 billion or 28% of 3 4orts of ,competitive :atoms, Out of this total oil products account proximat ly 1, billion and the remaining items account for about r Pno tm..., 'h0se figures are subject to a number of qualifications. r4E the more e,:',fectlve the action in & l1er t da t restricting Imports the you w 0tq from the u4p twhat some countries are affected by only tr t4 , whereas others are affected by as many as twelve. '^! er, azr le,, has been affected only by our restrictions of oil but A. directly involves more than 80 of that country's exports u United :'+t atos _ t oommo t briefl y ,on several of the more important " t C ei~ 6"r?'Y nit 4?.Fte c r i's t ca ectrtca1 coon, rient -- Our d~ision on the Greer's ' - : case, ? p en uproar in the United Kingdoms One extreme sector ' t spin on called for immediate discri.n nstion against purchases, ^ t ^ ~ eta The ''ritz sh consider the pending OCDY heavy electr ct .cal,,,pqui azaegt core '"the most important s tizbject in economic relations the United Kingdom since the institution of et 2tha mot FStasrlraa 1'mr. f f nG -~~