to do in order to obtain effective action by friendly nations to restrict and I say "restrict" here, not "embargo" because we still believe that embargo is not in the best interest of the United States. The CHAIRMAN. Why do you not think so?

Mr. LINDER. Well, Senator, if you will let me go on, I think that will appear.

The CHAIRMAN. All right.

Mr. LINDER (continuing). To restrict the export of strategic commodities to the Soviet bloc.

I shall attempt to be as frank in discussing this question as I possibly can, on the understanding that this is a closed executive session, and at certain points I will wish to emphasize the off-the-record nature of my remarks. I will indicate these points as I go along.

The CHAIRMAN. You do not need be hesitant about talking. This reporter has taken down information on the most secret sort of subjects, and whatever you say will be sent to you and you will be perfectly free to correct the record where you want it corrected. But if there are points you do not want taken down, just tell him and he will not write it down.

Mr. LINDER. I will indicate these points then as I go along.

The CHAIRMAN. You just say what you do not want taken down. Mr. LINDER. All right, sir.

[Continuing:] The reason for emphasizing the necessity to preserve the confidential nature of these remarks is that our ability to persuade other countries to cooperate with us in these matters depends in large part upon keeping our discussions out of the public record.

Before I talk about export controls as such, I should like to place this problem in its proper context of broader foreign policy objectives.

Today our one principal purpose is to increase the economic strength and military preparedness of the free nations of the world. The free world must be made strong enough to deter aggression and if necessary to resist it. We pursue this objective through our aid programs, through building up the North Atlantic Treaty Organization, through the United Nations, through our psychological-warfare program, and through the other major channels of our foreign policy. Our effort to limit the shipment of strategic items to the Soviet bloc is an important part, but only one part, of this broad program of action.

We are now engaged in a very critical struggle for human decency and freedom which the forces of the United Nations are actively waging in Korea. The origin of this struggle lies in the aggressive nature of the Soviet Communist movement. Our hope of emerging from this struggle successfully and of preventing the spread of conflict to other areas of the world lies in an important part in the building of greater economic and military strength in the free world relative to that in the Soviet-dominated area.

The real objective of export-control policy could therefore be summed up as a desire to increase the strength of the free world relative to that of the Soviet world. When trade takes place between Western and Eastern Europe, we want to make sure that the balance of advantage in it lies with our allies in the west. We will not accom

plish this by following the simple and clear-cut course of embargoing everything.

We must face the question: "Do we believe that a particular commodity is really so important strategically that to control it will help us more than it hurts us?" To reach a decision on a question like this requires expert technical advice, accurate information, and careful economic and political judgment.

Almost everything is in some degree, directly or indirectly, important to war potential and could therefore be said to have some degree of strategic importance. If we followed the easy phrase “embargo everything strategic," it would logically lead us to a policy of embargo everything or economic blockade with all its serious implications.

We can support, and we can expect our friends to support, only an export control policy which is clearly in our mutual security interest. Before I finish these comments on the policy background of the trade control problem, I should like to emphasize that in determining the type of trade controls which we should have, we must appreciate the limitations of what can be accomplished by a system of export controls. This is a question of determining the vulnerability of the Soviet bloc to measures of trade controls. Without going into the details of this subject, which, of course, through the National Security Council we have examined very carefully and in very great detail, I can say that, by and large, there are few parts of the Soviet bloc economy where an embargo on exports to the bloc would make it impossible for them to maintain existing levels of production. The Soviet realm does have a high degree of self-sufficiency. This can be illustrated by the fact that we estimate not much more than 1 percent of the gross national income of the Soviet bloc is derived from commercial exchange with the outside world, whereas in the United Kingdom, for instance, 18 percent of the income is derived from such exchange.

The CHAIRMAN. Is there anything confidential about the 1 percent? Mr. LINDER. No, sir.

This may also be illustrated by pointing out that in 1948, for instance, the total value of the Soviet Union's foreign trade (imports and exports) was only approximately $1,700,000,000 whereas the total foreign trade of the United States, which also is self-sufficient in large measure, was valued at nearly $20,000,000,000.

The CHAIRMAN. More than 10 times as much.

Mr. LINDER. Yes, something like 12 times as much. The Soviet bloc covers a large part of the globe, and with the exception of natural rubber, tropical fibers, and a few of the rare metals and certain gems, there is no lack of natural resources within its own borders.

Senator BRICKER. Have you any estimate of the proportion that is within Russia itself and that which comes from the satellites in the Soviet bloc?

Mr. LINDER. We have it, but I do not have it at my fingertips.
The CHAIRMAN. Well, would you want that, Senator?

Senator BRICKER. I do not know whether it is essential at all, because Russia and the satellites are all the same thing; they are all one and the same.

Mr. LINDER. Well, from the intelligence work which we do carry on, and carry on incessantly, we do have those figures, but I do not have them here.

Senator SPARKMAN. Do those figures relate to Soviet Russia or to the Soviet bloc? You said "Soviet Union."

Mr. LINDER. Yes, I said "Soviet Union," but obviously the Soviet bloc is in the same position in its trade with the rest of the world. Mr. ARMSTRONG. If I may, I would say that the rest of the bloc accounts for, we estimate roughly, about $1 billion more.

Mr. LINDER. There is a lack of some types of capital equipment, technology, machinery, and skills which are required to expand the Soviet economy on a war footing. A selective system of controls does affect the Soviet war potential. Neither by an embargo nor a system of export controls can we, however, expect to bring the Soviet bloc to its knees economically.

The United States has had in effect since March of 1948 a very restrictive policy on exports to the Soviet bloc. We can restrict our normally limited amount of trade with the Soviet bloc without injuring our national economy. It is far more difficult for certain other countries of the free world which are more dependent than we upon essential imports from the Soviet bloc.

It was clear, however, that the export controls exercised by the United States would be less effective in achieving their purpose if the major industrial and trading countries of Western Europe did not also control the same types of exports in more or less the same manner. We have consequently discussed with those countries of Western Europe the nature and purposes of our export control program with a view to securing the adoption of similar controls.

Most of the Western European countries agree with us that it is essential to deny shipments of items of direct military significance to the Soviet bloc. These include arms, ammunition, and implements of war, and the equipment and materials peculiar to their production. They also include materials and equipment useful in atomic energy development, and selected industrial items and raw materials of greatest strategic importance for the development of the Soviet bloc war potential.

In these cases the strategic importance of the items is generally clear and direct, and the views of the Western European countries as to what is strategic coincide substantially with our own. It is not always so easy to reach agreement on the precise strategic significance and appropriate extent of control for other items not so directly related to military equipment or military production.

However, within the past 6 months, there has been a substantial expansion in the scope of Western European export controls over industrial items and raw materials of this category of secondary strategic significance. The number of embargo items have increased by more than 50 percent, and the number of items subjected to some form of quantitative control have been doubled. We are also concentrating on bringing intransit shipments under more effective control.

At this point I should like to go into some further detail in order to emphasize the significance of what has been accomplished recently and, therefore, this part of my statement I would appreciate having off the record.

The CHAIRMAN. Off the record.

(Discussion off the record.)

Mr. LINDER. Because of Western Europe's limited ability to procure elsewhere sufficient supplies of coal, grains, timber, potash, manganese-due to present physical shortages, shipping bottlenecks, and lack of hard currency-Western Europe must for the present, at least, continue to obtain substantial amounts from the Soviet bloc in order to maintain essential living standards and the high levels of industrial production needed for an expanded defense effort. The chief means of payment at the disposal of Western European countries in bilateral bargaining with the Soviet bloc are the manufactured products which Western Europe produces in quantity.

Because of these facts we believe that such trade of the free world with the Soviet bloc at this time is beneficial to the over-all security interests of the United States. Provided that steps are taken to deny or limit exports to the bloc of items possessing the greatest strategic significance, we can insure that trade with the bloc results in a balance of advantage in favor of the free world.

And may I, gentlemen, interpolate something on that point? I have only been down in Washington for a little over 2 months. I am one of these businessmen who "got patriotic," and I think I approached this problem with which I have spent a great deal of time with the same degree of question mark in my mind as anyone else that is a loyal American would have. And after a great deal of study of it, and for whatever it may be worth, I want to say that I have come to the conclusion that there is only one basic way of judging this thing, and that is, to judge it the same way you judge a business deal. Two sides always have to make a trade, and you want to be awfully sure that you are getting the better bargain, and I think we can be reasonably sure that with the controls we set up and with the number of things that are put up to us the free world is getting the better of the trade and here, I should go off the record.

The CHAIRMAN. Off the record.

(Discussion off the record.)

Mr. LINDER. Back on the record. I was referring to a balance of advantage, you will recall, and now I should like to illustrate this principle with two examples. One of these received some comment in the press recently. It was reported that Italy was exporting to the Soviet Union 60 locomotives of 35 tons each and certain small powergenerating equipment. These items, together with some quantities of ball bearings not of the highest strategic grades, and a range of other products were included in a 1948 trade agreement with the Soviet Union. However, in return for these items, Italy received such essential commodities as 200,000 tons of iron ore, 20,000 tons of manganese, 2,500 tons of asbestos, 100,000 tons of pig iron, 75,000 tons of steel ingots, 100,000 tons of petroleum, 800 tons of nickel, and 300,000 tons of high-grade wheat. Now, this is clearly a transaction whose balance of advantage favors the west.

The second example which I wish to mention is a transaction, still under consideration

The CHAIRMAN. Off the record.

(Discussion off the record.)

Mr. LINDER. We feel and believe that the best method to attain our real security objectives is to continue, on the basis of persuasion and

voluntary cooperation, the present type of mutual export-control operation. We feel that the results which have been achieved so far justify such a program.

And now, sir, I would like to go off the record.

The CHAIRMAN. Off the record.

(Discussion off the record.)

Mr. LINDER. Now I should like to make some remarks about China which have come into the open recently.

The United States, believing the situation to justify such action, has already imposed complete economic sanctions against Communist China. The countries of Western Europe have, since the summer of 1950, embargoed the shipment to China of petroleum products, munitions, and a broad range of other strategic items. United States discussions with the British have led to the imposition of increased security controls in Hong Kong and Singapore.

Senator ROBERTSON. If I may interrupt, about 2 weeks ago I learned that during the past 9 months-off the record.

(Discussion off the record.)

Mr. LINDER. Additional export control measures which should be applied by United Nations members as a result of the Chinese intervention in Korea are currently under discussion in the Additional Measures Committee of the United Nations General Assembly.

The United States resolution proposes a full embargo of arms, of petroleum, and of items useful in the production of arms. Senator SCHOEPPEL. Of course, that is available.

Mr. LINDER. I have a copy.

Senator SCHOEPPEL. The point I am making is that this matter, this discussion with the United Nations, is information that Russia has been getting.

Mr. LINDER. Surely. The interpretation of what would be covered by this embargo would be left to individual countries, but after agreement to the action in the UN there is provision to follow up and by consultation agree upon items which would be embargoed under the formula. This we expect the Additional Measures Committee to adopt at its meeting on Monday.

A word on Japan. Japan prevents the export to China of strategic commodities, but does not prevent the export of certain nonstrategic commodities such as textiles and fishery products which are of importance in permitting the continuation of sufficient trade with China to assure the import into Japan of items of importance to the Japanese economy

Senator BRICKER. What items?

Mr. LINDER. Particularly iron ore, coking coal, and soybeans. Shipments of iron ore and coal have slowed down, but as of today I think soybeans, which constitutes an important food product, does come from China into Japan.

Hong Kong presents a special problem. It has always been a major gateway for trade with China. It is now peculiarly vulnerable since it depends upon the mainland for supplies of food and water. The colony does apply controls which have the effect of preventing strategic exports to China, and exports to Hong Kong from both the United States and Japan, two of the major suppliers, are carefully checked to assure that only the essential requirements of the colony are met with respect to the shipment of strategic commodities.