Foreign Relations of the United States, 1958–1960, Western European Integration and Security, Canada, Volume VII, Part 1

108. Telegram From the Mission at the North Atlantic Treaty Organization and European Regional Organizations to the Department of State⁰

Paris, March 3, 1960.

Polto 1723. Pass Treasury. Econorg. Following is text US presentation given Group of Four and being sent informally to individuals in OEEC capitals who presented views their governments to Group of Four.¹ Copy also sent Rey.

Consider it important restrict circulation this document to avoid as far as possible comparison between US reply and report Group of Four which may be made later by public with emphasis on differences.

Begin Text.

On March 1, United States Representatives presented their views on the reconstitution of the OEEC to facilitate the work of the Group of Four appointed under the resolution of January 14, 1960. The following confidential memorandum was submitted to the Group after the oral presentation.

My government believes that it is necessary to improve and strengthen economic consultation and cooperation on the basis of the Paris resolution of January 14, 1960. To help accomplish this objective, we think there should be established a reconstituted OEEC which could deal with emerging problems from a broader viewpoint and in which the United States and Canada could become full members.

The OEEC has been an outstanding success. Its major objectives have been largely realized. Western European economies have recovered and expanded. Trade restrictions have been reduced substantially and the movement of goods and services has increased greatly. Currencies of most of the member countries have become externally convertible. Valuable habits of economic cooperation have been firmly established. These habits of cooperation should be strengthened and extended to meet the new challenges which are emerging. It has become increasingly apparent that major action in the economic field by our governments has repercussions not only among ourselves but on a world-wide basis as well. We have become more interdependent, but at the same time what is done among ourselves has become of ever greater importance to other countries in the world.

As we take steps to improve economic cooperation among ourselves we must constantly be aware of the impact our actions will have elsewhere in the world. In considering policies pertaining to ourselves, we should bear fully in mind our world-wide obligations and responsibilities.

We think that the primary purpose of a reconstituted OEEC should be to encourage member countries to adopt policies designed:

(a) To facilitate attainment of the highest sustainable level of growth while maintaining financial stability and thus contribute to development of the world economy and promotion of world trade on a multilateral, non-discriminatory basis.

(b) To contribute to sound economic growth in nations and areas in process of economic development by appropriate means, including encouragement of the flow of development capital to these areas.

Our views on what should be done on a continuing basis in connection with these major objectives are as follows:

(A) The economies of member countries have become increasingly interdependent. Economic policy decisions by member governments are more likely to have repercussions in other member countries and elsewhere in the world than previously. Consequently, we believe there is a need for regular consultation among member countries on economic policies to maintain economic growth and financial stability. Realization of these objectives would contribute greatly to satisfactory development of the world economy. Accordingly, we think that the OEEC practice of maintaining a continuous review of the economic and financial situation of member countries should be continued and strengthened. There should also be periodic consultation about measures being taken by members to facilitate attainment of economic growth and financial stability.

(B) With respect to trade, we believe the orientation of the new organization should reflect the removal of justification for discrimination following achievement by most of the countries of external payments convertibility and the generally recognized need to take more fully into account the trade problems of non-member countries. General trade policies will be included as appropriate among the subjects which will be discussed in relation to general economic policies. Furthermore, there will be special or transitional trade problems which could properly be considered by the regional organization within the context of multilateral objectives.

We feel that the new organization should not infringe on the functions of GATT or be used in any way to support trade discrimination. We have given consideration to the question as to whether the OEECcode of liberalization should remain in force. The code has played a major role in reducing trade barriers of members. The code has achieved its major objectives, and emphasis should increasingly be on wide application of liberalization. We suggest an examination of the code to ascertain which, if any, of its provisions should be continued. Such an examination might well take place in the period between agreement on the convention of the new organization and establishment of the organization.

At the same time, we think it might be useful to examine the code of capital movements and to consider whether an amended version of the present code calling for liberalization of capital movements on a world-wide rather than a regional basis might usefully be adopted by the new organization.

Also, we regard it as essential that members of the new organization, during the process of consultation on trade policies, keep fully in mind the interests of non-member countries, particularly those of less-developed countries, and the importance of expanding markets for their exports.

(C) In keeping with our basic conception stated above of an organization evolving from our successful cooperation in the past and modified so as to make it more outward looking, my government believes that the organization should have as developed countries and areas of the world, [sic] The new organization should, in particular, foster consultation and facilitate coordination among member countries and organizations in a position to make available a significant flow of long-term development funds in order to encourage provision of bilateral assistance to less-developed areas. In this connection, what is needed, in our view, is a consultative forum for frank discussion and informal confrontations about the best means to increase the magnitude and improve the nature of assistance extended by them to less-developed countries.

(D) At the outset, we think the tasks of the organization should be centered primarily on the above major objectives. We believe, however, that certain other functions of the OEEC, particularly in scientific and energy fields, should be continued and perhaps expanded. We realize that there may be other activities which the present members of OEEC may wish to continue. We would, of course be prepared to consider carefully any proposal in this regard. The extent of the proposed activities would be conditioned by arrangements of financing which will need to be developed at a later stage.

My government hopes that all 20 governments party to the Paris resolution of January 14, 1960 will become members of the new organization. We also consider that appropriate arrangement should be made for the participation of the European Communities in the organization. In our view the convention establishing the new organization should be as simple, general and flexible as possible. A convention of this nature would allow the organization to develop and adjust in accordance with the changing nature of the problems which face members.

One of the key questions to be decided is that of whether the reconstituted OEEC should be limited to making recommendations or whether, as in the present OEEC, it should be able to make decisions. In our view, the difference may be more one of form than of substance, presumably a responsible government would not agree to a recommendation which it was not prepared to attempt to implement. However, since a number of governments have expressed the desire to retain some form of decision-making power in the organization, in the light of the experience of the past decade, my government is carefully studying the feasibility of accepting provisions along the lines of the present OEEC formula, with its multiple escape clauses, or some modification of it.

It should be recognized that the United States could not partake in any decision committing the United States that involved a matter on which its legislative branch would be required to act. Thus, we have not yet arrived at a final position on this matter, but will try to do within the near future.

Action to invite any non-signatory country or organization to accede to the convention should be reached by unanimous agreement of all members.

However, we think that it should be agreed that members may act by a qualified majority to invite non-member countries or organizations to associate themselves with selected activities of the organization. In our opinion, a council composed of all the members should be the body from which all formal actions in the name of the organization derive. We envisage that the council could, as now, meet interchangeably at ministerial level or at senior official level, with representation drawn either from capitals or from permanent delegations, as appropriate.

The council could establish subsidiary bodies for such purposes and under such conditions as the council might determine. At this stage, we envisage a relatively limited number of subsidiary bodies related primarily to the major objectives of the reconstituted organization.

It would seem desirable to establish an Economic Policy Committee designed to fulfill the functions of the OEEC Economic Policy Committee and the OEEC Economic Committee.

This Economic Policy Committee should comprise all members of the organization and should be responsible to the full council. The Economic Policy Committee should meet at senior official level, with representatives from capitals or permanent delegations, as appropriate.

Another major subsidiary body, we believe, should be a Development Assistance Committee composed of those members of the organization which are in a position to make available a significant flow of long-term funds on a bilateral basis to less-developed areas. In fact we regard it as an essential point that the organization absorb the Development Assistance Group of limited membership which is now being established on an informal and interim basis and which will have its first meeting in Washington shortly. In our opinion, the Development Assistance Committee should keep the council informed of its activities and should obtain council approval of any action which it wished to have adopted in the name of the organization. We think, however, that this limited Development Assistance Committee should be given considerable de facto independence, including the right to make recommendations to the governments represented on the committee without prior reference to the council. We also think that provision should be made for countries not members of the organizations to associate with the work of this committee. As you know, we have proposed that Japan be included in the interim Development Assistance Group, and we think it appropriate that Japan continue to be associated with the Development Assistance Committee. In this regard, we do not contemplate Japanese membership in the reconstituted OEEC.

In our opinion, general trade policies and special or transitional regional trade problems can be discussed in the council or in the Economic Policy Committee. We do not envisage the establishment at the outset of subsidiary bodies to discuss trade policies. However, as noted earlier, the council would have authority to establish subsidiary bodies. The establishment of a committee on trade problems is thus not precluded.

To enhance the prestige of the Secretary General and to provide a constant focal point for the work of the council, we think that the Secretary General should act as chairman of the council. (However, we consider that national representatives should act on a rotating basis as chairmen of the subsidiary bodies.) The Secretary General should, of course, be a man of international stature and should be assisted by appropriate staff.

In addition to the above mentioned functions there are certain activities of the OEEC in which we should like to continue our participation if the European countries also conclude that such activities should be continued in the reconstituted organization. Activities which in our present view would be appropriate for the organization and in which we should be interested in maintaining our participation are the following:

(a) We wish to maintain our present degree of association with the European monetary agreement but do not consider it desirable or feasible to accede to the agreement.

(b) We now consider that it would be best to maintain our present degree of association with the European Nuclear Energy Agency but do not think it would be desirable for the United States to become a full member.

(c) In our view, the activities of the Office of Scientific and Technical Personnel should be included in the reconstituted organization. We believe that the organization should also concern itself with common problems pertaining to fundamental and applied research. We should wish to establish a subsidiary body, perhaps called a science committee, to handle these matters.

(d) We believe that the reconstituted organization should concern itself with the type of activities performed by EPA under its chapter pertaining to the underdeveloped countries.

Concerning activities performed by the vertical and most of the horizontal committees of OEEC, we consider that it would normally be sufficient in the new organization if the Secretariat kept under review the main developments in the major sectors and informed the council when significant problems became apparent. The council would then determine whether it would be advisable to call a special ad hoc meeting of technical experts or to handle the matter otherwise. We recognize that there may be some activities, such as energy questions, regarding which arrangements should be made for regular consultation among member countries.

In conclusion, we firmly believe that the contribution to European economic recovery and expansion accomplished by the OEEC and the tradition of economic cooperation which it has established has made it possible for us all to confront our new tasks with confidence. End Text.

Burgess

0. Source: Department of State, Central Files, 374.800/3–360. Unclassified; Priority.
1. The text presented by Burgess was a revision of a draft transmitted to USRO in Topol 1669, February 26. (ibid., 374.800/2–2660). In Polto 1695, February 27, Burgess suggested modifications to the wording of this draft. (ibid., 374.800/2–2760) After a study of these recommendations in the Department of State, instructions for final revisions of the text were sent to USRO in Topol 1679, February 29. (ibid., 374.800/2–2960)