Cloak & Dagger Economics

On the night of May 13, 1953, a British revenue officer in Hong Kong, watching the midnight sailing of the Hong Kong-Macao ferry, spotted a man swimming in the dark water alongside the ferry's hull.

He was towing several inflated rubber bags. When the officer shouted at him, the swimmer dived and escaped. Inspectors who got the bags out of the water found that they contained American tool bits, of a type in great demand in Communist China. The Communist frogman had hoped to attach them to the ferry's hull, for the journey out of Hong Kong's territorial waters. After that, smuggling them into Red China would have been easy.

Barely a week later, Italian finance police picked up a California-born Italian citizen named Walter Rava in a small cafe in Milan. He was arrested for forging an Italian government import certificate for 5,000 tons of Chilean copper. Rava was part of a gang, headed by the Rumanian commercial attache in Bern, Switzerland, which specialized in getting control of strategic materials sent to Europe, supposedly destined for Western European businessmen. Once the goods arrived, they were smuggled behind the Iron Curtain.

Rava and the Chinese swimmer, each in his own way, were part of an international Communist drive to get strategic goods from the West. The British revenue officers and the Italian police were part of an effort by the free world governments to stop the Red smuggling. This week the U.S. economic experts who direct this effort published their third formal progress report, over the signature of Foreign Operations Director Harold E. Stassen. Their conclusion: controls on strategic materials exports to the Communists have considerably tightened.

Pressured Aluminum. The command center of the long economic fight against Communism is Washington's Economic Defense Advisory Committee, representing eleven government agencies, ranging from the Department of Agriculture to the Atomic Energy Commission. EDAC reports to Director Stassen, who is charged with administering the Battle Act. This law, passed in 1951, forbids U.S. aid to any country which knowingly permits goods on the U.S. embargo list to be shipped behind the Iron Curtain.

By the nature of their mission, EDAC and its agents overseas have to conduct most of their operations in secret. It helps no one but the Communists, for instance, to publicize the kind of pressure used to block a shipment of aluminum from going to a Communist country. As a result, the gaps in the control system are far more widely known in the U.S. than its successes. Total exports by the NATO countries to Russia, the European satellites and Communist China dropped from $1,269,700,000 worth in 1947 to $449,900,000 in 1952.

The U.S., as the EDAC report makes clear, cannot make its allies cut out trade in nonstrategic materials with the Communist bloc. EDAC's economic warriors, however, have tried to persuade other free world businessmen, and their governments, that trade with the Communists will not bring the rosy economic future which the Reds promise. Principal reason: Communist planners, intent on getting economic self-sufficiency inside the Iron Curtain, are interested in Western manufactures only until they can make the products themselves. While businessmen selling to the Communists may make fast short-term profits, they make their countries dangerously vulnerable to future Communist pressures when the Reds resume their old practice of using trade as a political weapon.

Precluded Kerosene. Since 1951, when the U.N. General Assembly embargoed arms and war material shipments to Communist China, the U.S. economic warriors have concentrated on widening the list of prohibited goods in other countries. To cut down free world exports to Red China, EDAC and its overseas agents are also constantly negotiating with free world countries to adopt more stringent inspection systems on shipping under their control. Using its exchange power as a lever, the U.S. tries to find alternative markets for countries which would like to sell to China. As a last resort, EDAC's cloak & dagger economists have used "preclusive buying," i.e., outbidding the Communists for China-bound goods. Early this year, in this way, the U.S. kept a shipment of Rumanian aviation kerosene from reaching a Chinese port.

For the first few months of 1953, according to EDAC's report, controls on strategic goods tightened, e.g., in March Britain agreed to establish a tougher licensing system for British ships in the Chinese trade (TIME. March 16). But shipments of nonstrategic goods, as a result of the Korean armistice negotiations and Red China's sudden eagerness to trade with the West, are almost 50% heavier than they were at this time last year. If the armistice sticks, the U.S. faces heavy pressure from foreign businessmen to cut down EDAC's embargo list, or abandon it altogether.

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