It was determined that the system of the free-world controls that had been developed during the last 4 years substantially satisfied the objectives of retarding the buildup of Soviet warmaking power and strengthening the free world relative to the Soviet bloc. The effort to extend the control lists appeared to be reaching the point of diminishing returns. It was decided not to pursue an extension of the lists to many other items--though items would always be added occasionally because of changed conditions or new information. On the other hand the Government recognized a need for simplifying the lists and removing or downgrading items, which, in the light of current information, were no longer deemed to be so important. The Government believed that much could be done in the months to come, if done carefully and with due regard for security, to adjust the controls to a "long-haul" basis. (Developments in the first half of 1954 will be reported in the next Battle Act report.) In general, it was decided to concentrate on seeking more effective control of those items which, if shipped, would make a significant contribution to Soviet warmaking power. The main thrust from the United States toward improvement of the control system, it was decided, would be in the field of implementation and enforcement of controls. Notable deficiencies existed in that field. To overcome them the free nations would need to keep improving their techniques, and would need closer international collaboration and pooling of information. The new direction also took into account, even more than ever, the economic and political problems of free-world countries. Free-world unity was so vital, and the economic health of free nations so important to the defense of free institutions, that problems of our allies deserved to be given great weight in determining the actions of this Government in the East-West trade field. This was not a new concept, but this Government felt that such problems needed to be discussed among the free countries more than in the past. In setting the new direction the Government recognized: (1) that maintaining commercial ties between the free world and the Soviet bloc--compatible with the security requirements of the free world--may have positive advantages during the present period of tension; (2) that there are, however, risks that trade may in some cases lead to undue reliance on the Soviet bloc as a trading partner; (3) that it is important to encourage trade within the free world, including the entry of commodities into the United States, by reducing trade barriers, especially when the effect of such action would be to decrease the reliance of the free world on the Soviet bloc. Those were among the highlights of the new direction. As explained before, the basic economic defense policy was not altered. =Reviewing the Control Lists=