Foreign Relations of the United States, 1952–1954, Western Europe and Canada, Volume VI, Part 1

840.00/10–152

No. 125
The Under Secretary of State (Bruce) to the Ambassador in Belgium (Cowen)¹

personal and
confidential

[Washington,] October 21, 1952.

Dear Myron: The problems you set forth in your letter of October 1² have also been causing concern to a number of us here in the Department. I am not sure how much enlightenment I can give on the solutions to them, but at least I can tell you what work is in process aimed at their solution.

The problem of German competition and similar competition from the Japanese, was your first question. There are essentially two ways of dealing with these new competitive forces. One is the construction of governmental and private barriers which would presumably insulate countries and regional markets from this competition. The other alternative is to see that our policies and programs have as their target increasing the efficiency of non-German Europe so that those countries can meet not only Japanese and German competition but American as well. This would appear to be the only feasible alternative. Certainly it becomes our responsibility and the responsibility of existing international institutions to see that competition is fair and not of the disruptive, coercive character that marked certain aspects of Japanese and German prewar practices. The prevailing temper of Western European governments and businessmen being what it is, there will be plenty of restraint imposed on German and Japanese competition and it seems to me the weight of this Government should be thrown on the side of maximum competition.

On the problem of adequate supplies of materials for our own use and for the use of other economies, you are undoubtedly aware of the work of the President’s Materials Policy Commission. While the Paley Report was aimed principally at the requirements of the United States economy, it did suggest the directions in which the entire free world should move.³ It seems clear that both the policies suggested and various practical steps which might be taken would be applicable equally abroad and at home. The NSRB has pulled together the views of the various agencies on these Paley recommendations and I understand will shortly submit to the President their conclusions. It is our expectation that one of the early pieces of business for a new Administration will be to decide what should be done in this critical field.

It is difficult to be more precise on these two questions at this time. The Department is aware of the critical state of economic affairs in the free world today and the possibility that the failure to meet these problems may undermine our existing political and security arrangements. We are, therefore, now engaged in pulling together a comprehensive study of the foreign economic problem. This work is being coordinated by Willard Thorp and will include an analysis of the economic situation as well as proposals for the new Administration as to legislative steps that might be taken to meet the problems involved. Two major segments of this staff analysis will be: one, a diagnosis of the European economy and the suggestion of remedial policies; and the other, the raw materials issue.

The institutional problems raised by the Schuman Plan, or any more far-reaching European federation, will be taken up as they arise—as is now the case in Geneva with respect to the relationship of the Coal and Steel Community to the General Agreement on Tariffs and Trade. As you undoubtedly know, it is our view that every effort should be made to see that international institutions, to the extent feasible, deal with the CSC as a juridical entity.

In your letter you also suggested that a European federation might settle some of our most immediate international problems such as the extension of economic and possibly even military aid, since presumably such a federation would be able to stand on its own feet. Unfortunately, it appears to us that this attractive result would be unlikely to occur in the immediate future. The basic economic advantages of European integration will undoubtedly come in time from the expansion of the market, from increased efficiency of production, and from the orderly elimination of inefficient economic components. It would seem, however, that the short-term outlook is for a difficult transition period through which the Europeans must go before they can enjoy the economic fruits of a more efficient European market. This is not to say that we shall necessarily have to rush in with special programs of aid beyond those presently contemplated to keep the process going, but only that these new institutions offer no immediate panacea.

Sincerely yours,

David Bruce

1. Drafted by Schaetzel and Meloy.
2. Document 115.
3. Regarding this Commission and its report, see vol. i, Part 2, p. 857.