1. Mutual security can best be advanced by continued increase in the political, economic and military strength and cohesion of the free nations relative to that of the Soviet bloc. 2. The free nations should not furnish a potential aggressor with goods which directly and materially aid its war industry and military buildup. 3. The free world may derive a net security advantage out of some East-West trade. 4. Security export controls should be applied on a selective basis, except in the case of military aggression, when a policy of complete embargo may be in order. In accordance with those principles the United States has long been exercising certain controls over its own trade. Here is a short description of those controls: =United States exports to Soviet bloc in Europe=: Not prohibited entirely, but limited to clearly nonstrategic goods. =United States imports from Soviet bloc in Europe=: Not prohibited, except for certain types of furs. =United States shipping to Soviet bloc in Europe=: Not prohibited, if carrying properly licensed goods. =United States exports to Communist China and North Korea=: Prohibited. =United States imports from Communist China and North Korea=: Prohibited. (Some licenses were issued, though not recently, for goods needed in United States military stockpiles and in special hardship cases.) =United States shipping to Communist China and North Korea=: Prohibited. As for the trade of the rest of the free world with the Soviet bloc, the policy of the United States was set forth in the Battle Act (the text of which is at the end of this report) and in certain executive directives. The policy was not to prevent all East-West trade but to cooperate with other free-world countries in a system of _selective_ and flexible controls. The aim was to prevent Soviet-bloc countries from obtaining items that would contribute significantly to their warmaking power, and to insure that the trade which did go on served the real economic and security interests of the West. Ever since the Communist aggression in Korea in 1950, the Far East has presented a policy problem different from the problem of controlling shipments to the bloc in Europe. The official position of the United States Government--both before and after the 1953 policy review--was that the current levels of controls by the United States and free world over shipments to Communist China and North Korea should be maintained. Later on in this chapter we shall report on what happened in the China trade during the last half of 1953. =The New Direction of Policy= So much for the basic policy. Now for the shifts in emphasis that took place in United States economic defense policy toward the Soviet bloc in Europe during the 6 months covered by this report.