Created: 3/1/1956

OCR scan of the original document, errors are possible

At several points In the paper reference is made to the threat to the industrial economies of Western Europe and Japan that is represented by the entry of the Bloc into the markets of the underdeveloped areas. It is true that tha Bloc has the potential for competing in identical markets and this would tend to restrict trading opportunities of free world countries* To the extent, however, that tbe Bloc is exchanging its goods for otherwise unsaleable surpluses, the economic Impact on the free world countries ia not harmful, and indeed, night in acme circumstances be beneficial. Furthermore, to the extent that SovietBloc credits have the effect of expanding the economies of the eveloped countries, the result for Japan and the Western European ations could conceivably be,et economic sense, desirable.

Thua far the growth of Bloc trade has been too limited for any general judgment. The physical volume of Bloc trade with the free world ia not yet back to ltaevel. If the OSSR ahould decide to expand its trade to the extent that would be economically feasible for it, the Bloc would certainlyarge factor in world markets. The total economic and political impact ofypothetical development needs careful examination.

On page U, It is stated that the "creditill impose no net economic burden on the Bloc economy." Since the Bloc economies presumably are operating in full employment situations and striving to achieve rapid industrial and military growth, any net flow of resources from them is likely to impose, for the moment at least, an economic burden. This burden, of course, cannot be great at the present time since the amounts involved are wii relative to total Bloc production. Nevertheless, we ahould recognize that any net flow of resources from the Blocuch greater burden to the OSSR thanimilar flow from the United States.

Both in tha summary and in the body of the paper it is stated that the Soviets are offeringtable market" for the primary commodity exports of the underdeveloped countries. Since the Bloc la now in effect re-exporting to the free world some of the primary commodities they are buying, the Bloc to that extent is acting merelyroker. In the past, Soviet trade has been notoriously erratic, as witness the experienca of Uruguay, Australia and Iran. Third, and most important, it is probably too soon to be sure that the Soviet Bloc has made the basic decision to embarkermanent expansion of its trade. We agree, of course, that the Bloc has the capability and that it would gain important economic advantages by an increased exchange of capital goods for raw materials and foodstuffs. Whether the OSSR reallyo departajor degree from its historic emphasis on self-sufficiency remains, however, to be seen.

niaor comments aro the following: Onthe diaapooint-ing effect of OSn winning over the countries of the Middle East, South and Southeast Asia- is contrasted with tha impact of Bloc aid programs. The subject of what economic aid can and cannot accomplish is far more complex than is suggested by this sentence, US programs have had their difficulties and shortcomings but they hare contributed to maintaining the independence of these countries, and this has been the aim of OS policy. It is too early to assess the Impact of Bloc economic progracs.

Onheretatement that the balk of the US economic aid ia going to "Rhee, Chiang, Japan, and Israel." At the present time no OS economic aid is going to Japan and the amounts going to larael are relatively modest.

One section of the paper might be expanded. This is Section VII,Posed for It is stated that tha main threat to. is political and strategic. Howerer, the substance of this threat is not analyzed. It would be useful to develop more fully the political and strategic consequences of closer economic and cultural relatione between tbe Bloc and the underdeveloped areaa.

Original document.

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