55. Memorandum of Conversation0

SUBJECT

  • Discussion of Questions Affecting OEEC

PARTICIPANTS

  • Mr. Gian Gaspare Cittadini Cesi, Deputy Secretary General, OEEC
  • Mr. Georg von Arnim, Head of Washington Office, OEEC
  • Mr. Ottino Caracciolo, Washington Representative, European Productivity Agency
  • Mr. Ivan White, Deputy Assistant Secretary for European Affairs
  • Mr. B.E.L. Timmons, Director, Office of European Regional Affairs
  • Mr. Robert L. Yost, Office of European Regional Affairs

After welcoming Mr. Cittadini, Mr. White noted his official interest in the OEEC, as well as his own personal interest which dated from his participation in the work of establishing the organization in 1947 and 1948.1

Mr. Cittadini expressed his hope that the US still considered the OEEC a useful tool for European cooperation. He noted that some people in the organization seem to consider the present situation one of “a free trade area or death” for the organization but that he considered this unrealistic. He believed that the OEECs work in the trade field was very important, but that it also had a broader strength, based on its essential work in many other sectors.

Spain

Mr. White noted that the US was watching with interest the OEECIMF activities in connection with possible assistance to Spain2 and that the US would be examining its future course of action in the light of the results of the OEECIMF operation.

Mr. Cittadini stated it was possible that the OEEC Council might have in hand before summer, and be able to take action on, a report on the nature of the Spanish problem. He was not entirely optimistic that this schedule could be kept however. Such action would probably consist of a mandate from the Council to draw up a set of concrete proposals which would take account of the probable nature, sources and amounts [Page 111] of assistance to Spain. Cittadini said that the Council was generally favorably disposed, though the Belgians were still reluctant. Scandinavian opposition had largely disappeared. He asked whether, if the Belgians or others should create obstacles in the path of a solution to the Spanish question, the US might be prepared to intercede. Mr. White noted that he felt that once the OEECIMF work with Spain had reached the point of developing a program of action, the US would be prepared to give appropriate support.

In response to a question, Mr. Cittadini said that it was his personal opinion, and that of others in the OEEC Secretariat, that there was real support in the Spanish government, as well as in Spanish intellectual circles, for a firm program of economic reform. He felt that this attitude might also extend to Franco himself and that once the latter accustomed himself to thinking in multilateral terms in the economic field, that chances might be good of his continuing to develop in that direction.

European Economic Cooperation and Trade Questions

Mr. Cittadini emphasized his concern over the difficulties that might arise in Europe out of a continuing divergence between the Six and the other OEEC countries, the “Seven non-Six” in particular. He termed this a “highly political problem.” He noted the need to refrain from doing anything to slow the progress of the Six but called attention to the serious consequences of “destroying” wider European cooperation.

Mr. Cittadini indicated that a short-term solution was not difficult to envisage—the Secretariat expected to take the initiative in proposing to the Council a so-called “Code of Good Behavior”, with an appeals procedure to facilitate the handling of day-to-day problems. For the longer term he had little to suggest, though he noted that Mr. Carli had recently suggested in London that 1) a Customs Union might be formed, including all of the OEEC countries but limited to typical European goods only, or 2) a complete Customs Union be established over a period of from 7 to 12 years. Mr. Timmons indicated that we were not familiar with these particular proposals, but that on first thought the former would appear unlikely to be able to meet the criteria of the GATT. The acceptability of the latter would appear to depend at least in part on whether or not a definite schedule of transition were prepared and adhered to.

Mr. White noted that the US was unable to look into the future on these problems but continued to be confident that the European countries would be able to work out equitable solutions.

On the trade side, Mr. Timmons believed it would be unfortunate if another meeting like last December’s Ministerial Meeting were to take place. He agreed that a split in Western Europe would be a most serious [Page 112] development but believed that the détente that had now developed had created a better atmosphere and he remained optimistic as regards the long-term outlook for good relations between the Six and the Eleven. He noted at the same time that US commercial and economic interests were increasingly involved, particularly since non-resident convertibility had removed much of the financial basis for unequal quota treatment as among imports from the various monetary areas. He was sure that the OEEC was bearing these concerns in mind; the role of the OEEC in this field was bound up in the entire question of international trade relationships, including the role of GATT and the nature of the obligations of the OEEC member countries to other nations of the world. The US would of course continue to follow this question closely in the context of our interest both in the cohesion of the Atlantic Community and of the economic interests of the United States and other Free World countries.

Mr. Cittadini referred to the letter of December 26, 1958 from Ambassador Burgess to the Secretary General of the OEEC3 and asked what timing the US had in mind with regard to the removal of quantitative restrictions on imports from the dollar area. In reply, the use of the wording “all feasible further progress” was referred to and Mr. White indicated that the more rapidly such removal proves to be feasible, the more pleased the United States would undoubtedly be.

Role of the OEEC

Mr. Timmons said that he agreed with Mr. Cittadini’s earlier remarks that the continuance of the OEEC’s present role in the trade arrangements of Western Europe was not essential to the existence or the vitality of the OEEC. He noted, without wishing to imply that the trade issues were unimportant in any way, that the OEEC had a much broader base than this and that it had other important functions. The Spanish operation now under way was only one of the current proofs of the adaptability and vitality of the organization. Mr. Timmons stated that US interest in the OEEC was as strong now as it had ever been.

Mr. White agreed, saying he wanted to stress again the importance with which we regard the work of the OEEC and the usefulness of the role which we believe it can continue to play. Mr. Cittadini suggested that it would be deeply appreciated if the interest of the US in the OEEC could be reaffirmed in a public statement, perhaps by Mr. Herter if possible. He was told that the Department believed a statement of this nature to be desirable and was exploring the possibilities.

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European Productivity Agency (EPA) and Scientific and Technical Personnel Program (STP)

Mr. Timmons stated that he believed there was an increasing comprehension in the US government of the usefulness of the OEEC’s EPA and STP programs. He was particularly encouraged by a growing appreciation 1) of the fact that the US is engaged through these programs in a mutual endeavor with the European countries and 2) of the importance of these mutual activities. Mr. Cittadini said that the EPA is now in the process of reorganization, which would probably include a change in name. He hoped that the new concept of the organization as the “operational arm” of the OEEC would be acceptable to all OEEC members, but noted that certain delegations which were not taking part in the Study Group drawing up the new terms of reference of the organization felt that the Group was in some instances acting in a vacuum. He noted that the Secretariat was bearing two objectives in mind: 1) preserving sufficient autonomy and flexibility in this new “operational arm” to make it easy for the US to participate in it; and 2) bringing the new unit closer to the OEEC as a whole for purposes of general policy coordination. He hoped the US would be able to help if necessary to overcome such opposition to the new concept as might eventually develop in some countries. He also hoped that the US might be able to participate formally on an even closer partnership basis than heretofore. With regard to the latter point, Mr. Timmons said that this question had not been formally posed but that the US would of course always be willing to look at all aspects of the problem.

  1. Source: Department of State, Central Files, 840.00/4–2259. Confidential. Drafted by Yost.
  2. During his service as First Secretary at the Embassy in France.
  3. Reference is to the Spanish stabilization program of the IMF and OEEC; see Part 2, Document 315.
  4. In the letter, Ambassador Burgess stressed U.S. determination to end discriminatory trade restrictions and reaffirmed that U.S. assets held by the European Payments Union would be transferred to the administration of the new European Monetary Agreement when it came into effect on January 1, 1959. (Department of State, EUR/RPE Files: Lot 68 D 29, Monetary Agreement)