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

Bruce Mission files, lot 57 M 38, “U.S. Aid”

No. 187
Draft Memorandum of Conversations¹

[Paris, December 15, 1953.]

Participants:

• Mr. Dulles, Secretary of State
• Mr. Humphrey, Secretary of the Treasury
• Mr. Stassen, Foreign Operations Administrator
• Mr. Burgess, Special Deputy to the Secretary of the Treasury
• Mr. Hunter, U.S. Treasury Representative (USRO)
• Mr. Jean Monnet, President of the High Authority of the European Coal and Steel Community
• Mr. Daum, Member of the High Authority
• Mr. Salewski, Director of Investment of the High Authority
• Mr. Guyot, Director of Finance of the High Authority

In the course of the conversations, Mr. Monnet outlined the general activities of the High Authority and discussed the problems now being encountered in its operations, particularly as a result of the effects which the creation of the common market is now having on the coal and steel industries. He referred to the migration of a number of coal miners from central France to the Lorraine basin, the situation on the steel market, the coal cartel problem, and the question of British association.

He stated that his main interest in the present conversations, however, was to obtain reactions to the High Authority’s draft letter concerning a possible United States loan, that Mr. Bruce had taken back to Washington two weeks ago.² He explained that the letter embodied the present thinking of the High Authority on the basis of investment studies undertaken following his visit to the United States and the publication of the President’s letter. Mr. Monnet said that the High Authority did not wish to transmit the letter officially to the United States Government and thereby formally request a loan until it had been ascertained that the proposals were acceptable to the United States.

Mr. Humphrey replied that the High Authority’s request came at a difficult time, since the United States budgetary situation was now very tight. He said that he would prefer not to have to ask Congress for the funds, but if such a step did prove necessary in the final analysis, it was probable that Congress would want to include the loan funds under the FOA appropriations for economic aid.

Mr. Monnet said that the High Authority was hoping to obtain a United States loan in the neighborhood of $500 million. Mr. Humphrey replied that the problem would be simpler if the amount were smaller, and added that he had understood that the High Authority was thinking of a figure somewhere between $400 million and $500 million. This was confirmed by Mr. Monnet.

(Secretary Dulles was present at only the first meeting on December 13 and was obliged to leave early. In a conversation with Mr. Monnet prior to the arrival of Mr. Humphrey and Mr. Stassen, Mr. Dulles had also remarked that he thought $500 million was more than could be obtained from the United States.)

Mr. Humphrey expressed doubt that the High Authority could use the full amount of the loan for investments in the coal industry. Mr. Monnet replied that the High Authority was prepared to demonstrate that $400 million could be used over a period of four to five years and was a reasonable figure on the basis of the scope of the Community’s investment program and the availability of capital on European markets. He added that the needs of the coking coal, coal and iron ore industries, which form the basis of the High Authority’s loan request, constituted only part of the total investment requirements of the Community. Requirements are much larger when account is taken of the needs of the steel industry.

Mr. Humphrey then stated that he wanted to be perfectly frank on one point that worried him considerably. He said that the United States Administration was already having difficulties with the coal industry and the coal miners, and could expect strong opposition from them to any loan to the CSC. The Administration did not want also to attract the opposition of the steel industry. There was a widespread feeling in the United States, he said, that it was incorrect to make use of the taxpayer’s money to help competitors or potential competitors. For that reason, said Mr. Humphrey, care would have to be taken to ensure that none of the loan funds are used to finance investments in the steel industry.

Mr. Monnet replied that it is not the intention of the High Authority to use the loan proceeds for investments in the steel industry. He said that he had told the steel industry, and the German industry in particular, that upon obtaining its loan from the United States the High Authority could be counted on to assist only to the point of perhaps guaranteeing whatever loans the steel industry might be able to obtain, especially from the World Bank.

Mr. Humphrey then pointed out that it was not possible to dissociate coking facilities from the steel industry. In reply, Mr. Monnet, seconded by Mr. Daum, described the special situation existing in Europe by explaining that most of the cokeries in the Community are located near the coal mines and belong to the mining firms, instead of being located near and owned by the steel plants as is generally the case in the United States. The gas produced by the coking plants, to the extent that it is not reused in the same ovens, is generally piped into the industrial gas network for sale to the processing industries and to domestic consumers. It is often piped long distances; for example, from Lorraine to Paris, or from the Ruhr to Berlin.

Mr. Humphrey said that he would like to discuss certain technical aspects of the investment projects that the High Authority plans to help finance. Mr. Daum then described the main lines of the proposed investment program for the coal industry, stressing the concentration of mines and the mechanization of installations; the construction or the modernization of electric power plants; housing—considered indispensable for promoting an increase in productivity and, in some cases, in production; and investment in coking plants.

In answer to a question of Mr. Humphrey, Mr. Daum stated that the proposed investment projects studied by the High Authority would affect about three fourths of the total production of the Community. Mr. Humphrey then asked a number of questions concerning workers’ housing. The question of ownership of housing arose, and Mr. Humphrey indicated that he did not favor ownership by the companies, since experience has shown that such a system could sometimes cause additional difficulties in relations between labor and management. Reference was here made by the High Authority representatives to present efforts to work out methods in most of the countries of the Community to provide for mixed cooperatives (for housing construction), on which labor and management as well as local authorities were represented. It was also stated that the High Authority looks favorably on the principle of extension of ownership of housing to the worker.

Mr. Humphrey inquired if the total amount of investment foreseen as realistic from the point of view of the possibilities and capacity of the industry of the Community. He was informed that present investment plans are directed toward urgent solution of a certain number of problems important for the future of the common market, and that the High Authority’s estimates were not of substantially greater amounts than actual investments realized in recent years.

In answer to further questioning by Mr. Humphrey, it was stressed that the High Authority has not drawn up and does not intend to draw up an investment program per se. The High Authority has only proceeded to estimate major investment requirements on the basis of information furnished by the firms themselves. Whatever loans the High Authority might grant to the firms would be used solely to finance investment projects decided upon by the firms.

Mr. Humphrey asked how the High Authority planned to conduct its lending operations. Mr. Monnet replied that loans would be made to individual companies purely on a business basis after study of the commercial and financial soundness of each firm and its plans for obtaining financing from other sources. He added that the High Authority planned to lend a company only part of the funds necessary for its investment financing; the balance would have to be procured through self-financing or from sources other than the High Authority. In answer to a question of Mr. Stassen, Mr. Monnet indicated that the High Authority would probably ask the firms to pay interest on loans at a rate slightly higher than the interest rate of the United States loan to the High Authority.

Mr. Humphrey inquired what form of security the High Authority would demand in exchange for its loans; for instance, would the High Authority ask firms to pledge assets as security for their borrowing? Mr. Monnet said that the High Authority could take bonds of the companies, but had no intention of accepting stocks or in any way participating in private enterprises. Discussion of this point was unsettled, though it appears to have been Mr. Monnet’s intention to make clear that the High Authority was not prepared to pledge the assets of the borrowing firms to the United States as security for the United States loan to the High Authority.

At one point Mr. Humphrey asked Mr. Monnet how long a duration he envisaged for the loan. Mr. Monnet replied that the High Authority would prefer that it be as long as possible. Mr. Burgess then remarked that loans for coal equipment generally did not extend over ten to fifteen years, and the subject was dropped there.

Mr. Humphrey said that among the problems raised by the loan was the fact that, as he understood it, the High Authority wanted to borrow local currencies instead of dollars. Mr. Monnet agreed and explained that it would be more convenient for the High Authority to have only to repay in local currencies and not incur a dollar obligation. However, it was prepared to accept a dollar loan and make the necessary foreign exchange arrangements with the CSC member Governments. In answer to questioning by Mr. Burgess, Mr. Monnet said that to the best of his knowledge the High Authority’s investment plans revealed no dollar needs.

Mr. Humphrey stated that under the circumstances perhaps a loan from the World Bank might prove to be the best solution. Mr. Monnet disagreed, arguing that 1) it would be impossible to obtain the required approval of the Governments of the six CSC member States for such a loan, and 2) this would defeat the desired purpose of demonstrating continued United States support for an integrated Europe. Mr. Humphrey stated that he would like to investigate further the possibility of lending the High Authority local currencies instead of dollars. Mr. Burgess inquired if Mr. Monnet thought that the World Bank would be left out of the picture entirely. Mr. Monnet then repeated his earlier remarks to the effect that once the High Authority has obtained its loan from the United States for the coal and iron ore industries, it would consider how it could assist the steel industry of the Community to obtain funds for investment financing from the World Bank.

Mr. Humphrey raised the question of whether it would be advisable to take a decision on the loan to the High Authority before the EDC had been voted, inasmuch as failure of the EDC could perhaps lead the United States to revise its European policy. Mr. Stassen disagreed with this approach, stating that in his opinion it would be wiser to move ahead with the loan operation and perhaps by that means improve the chances for success of the EDC.

Mr. Monnet said that he agreed wholeheartedly with both Mr. Humphrey’s and Mr. Stassen’s views and then proposed what he thought would be a means of overcoming such problems. He suggested that perhaps the United States Government could in the very near future announce that it will ask Congress to approve a loan to the Coal and Steel Community of a certain amount, with terms and conditions to be determined by subsequent negotiation. He added that this method would meet the need for reaffirmation of United States support of the European Community and would go far toward inciting the British to move ahead with plans for association with the Community. (He said that Guy Mollet had assured him that concrete results on British association would make a difference of at least 20 votes for the EDC Treaty in the French Parliament.)

At this point Mr. Monnet stressed that for political purposes the size of the loan was all-important; whereas a smaller loan would, of course, still be interesting as a business proposition, a loan in the order of $400 million was necessary to give full political significance to United States recognition of the new prospects for economic development opened by the European Community. (Mr. Monnet was not consistent as regards the specific amount of the loan, and on a different occasion cited the figure of $500 million in support of the same line of argumentation as above.)

Mr. Monnet said that the negotiation of the terms and conditions of the loan would require some time, with the result that a final decision would probably not have to be taken by the United States Government until the situation was clearer as regards the future of the EDC and the European integration program in general. In the meantime, however, the United States Government would have taken a rapid administrative decision to secure the necessary lending authority for the proper amount, and the full political impact of that decision would have had its effect in Europe, he said.

Mr. Monnet then asked when the proposed letter from the High Authority should be transmitted officially to the United States Government. Mr. Humphrey replied that he fully understood the facts of the problem as far as the High Authority was concerned, but thought that the best solution would be to leave the United States Government free to decide the appropriate time for official transmittal of the request. This would give the United States the necessary time to study the question, and particularly to ascertain the availability of the funds and the desired conditions of reimbursement. Mr. Humphrey concluded that such a study would require perhaps two to three weeks.

1. This draft memorandum summarizes several conversations held in Paris, Dec. 13–15, between the listed participants. Dulles, Humphrey, Stassen, and their advisers were in Paris to attend the North Atlantic Council meetings on Dec. 14–16. No separate record of Monnet’s meeting with Dulles on Dec. 13 was found in Department of State files, although this composite record briefly notes that Dulles attended that meeting but was absent from any subsequent meetings. A record of Monnet’s meeting with Humphrey and Stassen on Dec. 15, which is included in this summary, is in Bruce Mission files, lot 57 M 38, “U.S. Aid”.
2. For information concerning this draft letter, see Document 184.