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

RA files, lot 58 D 374, “CSC Loan Negotiations”

No. 186
Memorandum by the Deputy Director of the Office of European Regional Affairs (Palmer) to the Assistant Secretary of State for European Affairs (Merchant)¹

restricted

[Washington,] December 11, 1953.

Subject:

• Secretary Humphrey’s letter on the CSC Loan.

1. Attached is the carbon of the letter of December 8, from Secretary Humphrey,² which we have heard about from the Treasury and which has now been received officially. The letter is referred to in paragraph 8 of your memorandum to the Secretary of December 9, 1953.³

2. The action copy of Mr. Humphrey’s letter is now in RA. In view of the prospective conversation on the loan between the two Secretaries on the plane,⁴ we plan to postpone drafting a response until we learn of the outcome.

3. The following comments are intended to clarify or point up some of the issues raised in Secretary Humphrey’s letter:

a. Secretary Humphrey states that the loan “would have to be a straight appropriation by the Congress.” We have been advised by OFD that it would appear technically feasible to have the loan handled as a Treasury public-debt transaction, requiring authorization by Congress, but not appropriation. Mr. Humphrey may not have been aware of this possibility when he wrote the letter. On the other hand, he may have considered and rejected it—preferring for political or other reasons to have the loan subjected to the rigors of the appropriation process.

b. The letter states that $400–$500 million would not be required to rehabilitate the coal and iron mines. The Department has received unofficially an explanation of the CSC’s estimates of investment requirements. They are based on the needs both to modernize and to expand production of coking coal, coke, and iron ore. The breakdown of the four-five-year requirements is as follows: (millions of dollars)

Coking coal production:
	Modernization, maintaining and increasing production		$580
	Miners’ housing		400
	Power stations at the pit head		300
	Coking capacity		300
Iron ore:
	Modernization and expansion of production		100
	Preparation of ore		70
		Total:	$1,750

The figure of $400–$500 million represents only the portion of the investment funds which the HA hopes to obtain outside of Europe—i.e., in the U.S.

c. You will note that no sums are included in this total for the steel mills themselves, in answer to the question implicit in Mr. Humphrey’s letter. On the other hand, the intention of the HA is clearly to facilitate an expansion of the steel production by removing the limitations that exist in terms of the availability and price of the basic materials. The HA’s calculations are geared to the fundamental thesis that the Community must take an all-out effort to increase its steel production capacity to 50 million tons (compared with actual production of 42 million tons in 1952), in order to lay the basis for European economic expansion which would otherwise be hindered for lack of steel. The estimates of production increases in coal, coke, and iron ore production are those required in order to make possible the increase in steel production capacity.

Implicit in the calculation is the assumption that Europe should, through efficient production, be able to free itself from the need of importing coal and coke which must be paid for in dollars.

d. The U.S. has been strongly urging the Europeans, through the OEEC, to concentrate on expanding production, which generally leveled off in 1951 and 1952. Mr. Hauge personally developed this theme in Paris, and Mr. Stassen, at the October OEEC meeting stated “the necessity for economic expansion is a compelling one. This compulsion arises in some measure because of the continuing threat of aggression.… Of even greater importance is the necessity to meet the legitimate and reasonable expectations of all free peoples for rising living standards and a better life.”⁵

e. Europe is still importing a substantial quantity of coking coal from the U.S.; although such imports have declined sharply over the past year, U.S. coal exporters, who are now complaining about Belgian and German restrictions on coal imports from the U.S., will undoubtedly be concerned about the use of U.S. funds to increase European coal production. Mr. Bruce, however, feels that opposition from this quarter to a loan will be less than might be anticipated.

The steel producers in the U.S. will also undoubtedly, as Mr. Humphrey noted, be concerned about the U.S. helping directly or indirectly to increase competition from abroad, with the greatest competition coming presumably in third markets. A letter to this effect has already been received by the Commerce Department from Inland Steel. There is, of course, considerable uneasiness about the prospective demand for steel, both in the U.S. and in Europe, where production in recent months has been 7–8% below the corresponding period of 1953.

f. Whatever the decision may be about the size of the loan which would be feasible or required from the U.S., it is clearly of importance to the free world to have additional European steel capacity in light of expanding Soviet bloc steel production. Any suggestion that the U.S. wished to discourage such expansion could have serious political repercussions.

g. Mr. Humphrey’s letter recognizes that the U.S. Government is heavily committed to a loan, as a result of the President’s public exchange of views with the Congress.

1. Drafted by Boochever.
2. Supra.
3. Not printed; it recommended that the Secretary discuss the loan with Humphrey prior to their meeting with Monnet in Paris in order to first reach agreement on the size of the loan. They could then inform Monnet of the size of the loan which the Administration was prepared to support if suitably justified by the High Authority. (RA files, lot 58 D 374, “CSC Loan Negotiations”)
4. Presumably a reference to a scheduled meeting during the trip to Paris for the North Atlantic Council meetings planned for Dec. 14–16; no record of this Dulles–Humphrey conversation was found in Department of State files.
5. Ellipsis in the source text. For information concerning the 231st meeting of the Council of Ministers of the OEEC, Oct. 29–30, see Document 180.