840.50 Recovery/7–2947: Telegram
The Ambassador in France (Caffery) to the Secretary of State
3022. For the Secretary and Lovett from Clayton. Sir Oliver Franks at his request called on me today in his capacity as chairman of the Committee of European Economic Cooperation and gave me a review of the work of his group to date which closely paralleled the reports we have already received from Ambassador Caffery.
Franks then said that it was only this week that the members of the executive and cooperation committees were beginning to discuss key policy matters and that he expected that they would really come to grips with these problems in a fortnight’s time, or when questionnaire data had been received and collated.
As a prelude to policy formulation, Franks has recalled the attention of his group to pertinent sections of the Secretary’s Harvard address, which he interpreted as posing three major problems with which the conference should concern itself:
- 1.
- The immediate increase in European production of essential commodities.
- 2.
- The financial problem, subdivided into (a) external balance of payments, and (b) internal financial stabilization in European countries.
- 3.
- The problem of freeing trade movements within the European community.
In reply I said that this interpretation was quite sound and in line with our own thinking to date. I emphasized (a) the tremendous difference in the European balance of payments which would result if Europe could regain its pre-war position in coal and food production; (b) the close attention we were giving to the currency stabilization problem; and (c) the absurdly uneconomic lengths to which exchange controls had been carried in Europe. Examples cited were the day-by-day administrative interventions which intervened to prevent both export and import movements and the artificial exchange rate policies of some countries which were reducing the flow of goods to the United States to a mere trickle.
Franks then mentioned the following special questions which had or soon would arise in the conference:
1. The German Problem.
Franks mentioned that it was becoming apparent that German recovery was inseparably linked to European recovery and that the smaller countries all recognized this to one degree or another. The French attitude towards German recovery was an emotional one, but Franks was encouraged that the French, after some discussion, had abandoned their position that any approach had to be based on 1946 level of industry plan1 and had agreed to the dispatch to zone commanders of technical questionnaires in same form as sent to participant countries.
Mention was also made of fact that French had also agreed to treatment of three western zones of Germany as a group in balance of payments study.
2. Preparation of Report.
Franks mentioned that question had been raised in conference concerning desirability obtaining services some American so that report could be drafted in such a manner that it would be attractively presented to the United States. I replied that I did not think it would be advisable to employ any public relations counsel for this purpose; that Europeans were quite capable of preparing an adequate report and that if they desired Department’s views on special aspects, they could be obtained on a “within the family” basis.
3. Possible Conflict With Trade Charter.
Franks said that several delegates were honestly perplexed as to how program of reducing intra-Europe trade barriers could be adopted without violating proposed trade charter. In reply I pointed out that charter was a pioneer effort; that we felt that a customs union such as Benelux was progressive; but that a preferential system was discriminatory. If the conference should come up with a plan which provided for a series of definite, overall percentage reductions, culminating in the elimination of barriers at a definite time, I was confident [Page 341] that the charter could be adapted to meet such a program; in fact consideration now being given to modification charter accordingly.
At Frank’s suggestion and to dispel any feeling among the smaller countries that they are being left out of things, I am meeting informally on Thursday with the executive committee, which includes representatives of Benelux and the Scandinavian countries, as well as United Kingdom, France and Italy. [Clayton.]
- This plan is printed in the Department of State Bulletin, April 14, 1946, pp. 636–639.↩