NATIONAL SECURITY POLICY


  We are now extending to China our policy concerning trade with
communist areas, which is to restrict trade in commodities of security
importance but to permit other exchanges to take place. This east-
west trade problem is a complicated and tricky subject. Total-cessation
of trade with communist world would not be in our interest or that
of other non-communist countries. It is particularly desirable that
countries lacking raw material sources and markets for industrial
products, such as Japan, western Germany, and U.K., should not be
wholly cut off from communist orbit, since we could not permanently
make up resultant deficits. But we must see that trade does not give
unequal advantage to communists. And we must stand by to provide
alternative in emergency, so that our friends can maintain independ-
ence in their bargaining with communists.

                   III. NON-COMMUNIST WORLD
                            A. GENERAL
  Hard to generalize. Embraces great variety of nations and problems,
Such varied elements as:
   1. Latin American countries
   2. Dependent areas
   3. Under-developed areas just entering into independent status
   4. Old industrial areas losing their colonial empires
   5. Well established small independent states in Europe
   6. Older Commonwealth countries
   Plainly huge variety of problems embraced in U.S. relations with
these countries. Only two main generalizations can be made:
1. Economic dollar-gap problem.'5
   Self-financing of U.S. exports over nearly half a century. Logical
 necessity of increasing imports or restricting exports to the exent we
 are not prepared to continue large grants and loans. Export of invest-
 ment, capital only partial answer. Point IV will help, but again-
 only partially and through a delayed action. ITO Charter will also
 only have a delayed effect; but failure to ratify it now might be con-
 fusing -and discouraging to our friends. Best solution in national
 interest-increase in imports. But some continued foreign aid will
 certainly be required, in our own interest, after present ERP program.
 Solution of this problem important to health of entire non-commu-
 nist world.
 2. Psychological.
   U.S. has la problem in misconceptions about us which are prevalent
 throughout non-communist world. These partly a natural reflection of
 For documentaition on 'the United States commercial policy program, see
 pp. 681 if.
      496-362-77  10


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