840.50 Recovery/8–2047: Telegram
The Ambassador in France (Caffery) to the Secretary of State
3327. From Clayton and Caffery. With reference to the suggestions made in your 3029 August 14, 6 p. m. we met yesterday with Sir Oliver Franks, chairman, Committee of European Economic Cooperation. Ambassador Douglas was present and participated in the conversation but left for London before this telegram was drafted.
Franks gave us a report on the progress of the conference, first mentioning that the technical commodity reports were now going to the Executive Committee, after which they would be presented to the General Committee, but that these individual reports would not be finally approved until the entire report was adopted. It was expected that all these reports would have been submitted to the Executive Committee this week and that by the end of the week the balance of payments report, incorporating data from all of the countries, would be ready for committee consideration.
In reply to our inquiry, Franks said that the criterion used by individual countries in determining their requirements is based on the standard of living which they expect to be able to maintain after 1951 without special external assistance thereafter. It had already been learned that in some cases it would be necessary on a global basis to scale down requirements simply because they exceeded any possible availability. He cited specifically the case of bread grains but pointed out that the committee action would be limited to reducing the global amounts and that the actual allocations to be made to individual countries would have to be determined elsewhere.
Next Franks referred to the active discussions during the past week concerning a possible customs union (reference Embassy’s 3195, August 9, 3269, August 14, and 3290, August 161). Franks mentioned that France and Italy had taken an affirmative position in regard to the development of a Customs Union among the participating countries; that the United Kingdom was not in a position at this time to commit itself to such a program but had no objection to other countries going ahead with such an arrangement. The Benelux group had previously indicated that it was not interested in participating in a general union which did not include the United Kingdom but he did not know whether this group still held the same view. The Irish delegate was even less favorably inclined towards the customs union proposal and the Turkish delegate had made a speech on the subject which did not clearly set forth his position. The other delegates were still awaiting instructions from their governments.
[Page 365]Franks set forth the position of his government as reported my 3290, August 16 and then inquired as to our view concerning the importance of the adoption of the Customs Union program in relation to public opinion in the US toward a European plan.
In reply we made it clear that the US was not making at this time a demand for a commitment in regard to the intentions of the participating countries to eventually form a Customs Union. We did, however, point to the need for a positive constructive program quoting the Department that “an itemized bill summing up prospective deficits against a background of present policies and arrangements will definitely not be sufficient”. It was our belief that definite measures directed towards the eventual elimination of trade and other barriers among the European group would meet with a very favorable reception in the US, but that a mere statement of intentions to explore the matter would hardly be impressive.
We next mentioned to Sir Oliver that the Department had commented that the Europeans might make more progress if they were to imagine that they had no choice but to try to work out their problems without any outside support. He replied that if such a planning approach were used it would result in a program based on self sufficiency (as contrasted with a viable economy) and that the pattern would be entirely different from one based on fitting Europe into a world economy and on the assumption of some kind of outside assistance during the transitional period. We are inclined to agree with this point of view.
We next outlined to Sir Oliver the six basic principles mentioned in Section III of the Department’s telegram under reference. He remarked that there were some delegates to the conference who were thinking in terms of forming a comprehensive organization to control the allocation of production, rates of reactivation, etc., among the participating countries, but that he had resisted this type of restrictive approach. On this point we refrained from setting forth the Department’s position in detail as stated in your telegram under reference. We had previously given attention to Section II 3a of your telegram which called for the full productive effort of European countries to solve their production problems in concert, stating that “this involves agreement on rates of reactivation among the participating countries, sharing of commodities in short supply on equitable basis, special efforts in one country to direct production into fields helpful to others, etc.”
We found this comment to be disturbing, not only because it would provide an excuse for resuming the cartel practices which so retarded industrial progress in Europe before the war, but also because it would tend to stimulate bilateral trade and to intensify the various economic [Page 366] controls which under the best of circumstances have removed incentives for maximum output and which in other cases, such as France and Italy, have so distorted the productive and distributive processes as to almost result in economic chaos.
We hope on reconsideration, the Department will agree that the language quoted above would be subject to a wrong interpretation (and will approve our action in not passing it on to Sir Oliver).
Sir Oliver next raised the question whether it would be desirable to have some form of continuing organization to deal with this program after the final report had been approved and forwarded to the US, pointing out that the Scandinavian countries (keeping one eye to the east) were reluctant to continue this activity in its present form beyond that point. In reply we said that, while at present we saw no need for an organization of participating countries beyond the period of assistance envisaged in the Marshall approach, it seemed to us that there would be such need during that period. We pointed out that an effective plan would require specific measures by each participating country in such fields as production, financial and monetary stabilization, and removal of trade barriers and that we believed that the American public and Congress would be impressed by a multilateral undertaking in which the individual countries would obligate themselves to the group to do specific things, their failure to do so constituting grounds for review and appropriate action by the group.
Sir Oliver next said that, while the order of magnitude of financial requirements from the US for the program would not be known until the end of the week it was quite possible the total sum would prove so large that “pruning down would be necessary before the US would find the program acceptable.” He regarded it as a basic question whether this reducing procedure would be done by the US or by the conference itself. As an illustration he mentioned the very large steel output estimates submitted both by bizonal authorities for Germany and by the French govt under the Monnet plan, pointing out that there would not be enough coke available to meet global requirements. The difficulty was that this was a problem outside the jurisdiction of the conference but until it could be resolved the global deficit for the European balance of payments would be larger than would be the case if the level of industry and Ruhr questions were settled.
We next mentioned to Sir Oliver the suggestion made in Sections IV and V of the Department’s telegram under reference regarding the assignment of additional personnel to the Paris Embassy to become familiar with the methods and work of the conference with a view to advising the Department concerning suggestions which it might find desirable to make to the conference. It was pointed out that such personnel would work with the Ambassador and White2 in an informal [Page 367] capacity and as members of the Embassy, not having individual liaison with the conference. Sir Oliver agreed enthusiastically with this suggestion and we recommend therefore that the officers mentioned in Department’s 3048, August 14 be sent to Paris as soon as possible. We also recommend that telegraphic travel authorization be transmitted immediately to Geneva detailing Robert Terrill3 to assist in this work in Paris.
Before closing the conversation Sir Oliver raised the question of the procedures under which the report was to be transmitted to the US and made available to the American and European publics. We replied that we had no instructions on this point but would request the Department’s advice. It seemed to us, however, that under the circumstances it would be proper for Mr. Bevin as chairman of the conference to transmit the report to Secretary Marshall whose Harvard address inspired the calling and organization of the conference. Furthermore it was very important that publication of the report take place in the US simultaneously with its release in Europe.
We agreed that the people in Washington at some stage would want to discuss the matter with some of the conference members, probably the Executive Committee and that the need for this would probably arise at the time the report was being studied by an inter-Departmental group. It was believed that work on the drafting of multilateral and bilateral agreements could, in accordance with previous practice, go on while Congress was debating the program.
We would greatly appreciate receipt by telegram of the Department’s views in regard to the foregoing.
Throughout the conversation we emphasized the informal character of our views; the fact that they constituted no commitment and that final decisions regarding their program would be taken by the Congress.
Sent Department as 3327, repeated to London for Douglas as 649.
Caffery