RA files, lot 58 D 374, “CSC—UK Association, 1954–55”
No. 188
Memorandum by the Officer in Charge of
Economic Organization Affairs (Camp) to the Assistant Director for
Policy and Planning, Office of the Director of the Foreign
Operations Administration (Gordon)1
Subject:
- Situation in the common market of the European Coal and Steel Community.
Apart from the problem of British association, which was covered in the despatch to the Department,2 there are three matters on which the High Authority should take action within the next few weeks and which I therefore also discussed, in general terms, in Luxembourg. The first, and probably most important, is the problem of cartels, both the cartels within the common market and the export cartel, but particularly the former. The second, and related problem, is that of prices. The third is the proposed loan negotiations with the United States. The first two problems have already been let run too long.
Cartels. The High Authority has, as yet, made no strong move against the powerful coal and steel cartels known to be operating within the Community, one of the most flagrant of which is the South German coal marketing cartel. The cartel issue has recently been thrust into the foreground by the publicity surrounding the export cartel formed last spring by the six countries and the fact that the United States Government is generally known to have made representations to the six governments urging the disbanding of the cartel. The question of the action to be taken on the export cartel will be before the Council of Ministers on December 21, but it seems unlikely that either the High Authority or the Council of Ministers will feel action at this time is desirable. Although the “liberal” members of the High Authority (Monnet, Etzel and Spierenburg) are clearly opposed to the export cartel, they have an understandable reluctance to proceed on what they regard as a wobbly legal case prior to taking action on those domestic cartels [Page 344] which are explicitly outlawed by the Treaty. They fear that if an appeal from a decision against the export cartel were to be made to the court, the court might well find that the High Authority had exceeded its jurisdiction and that such a finding would be looked upon as a victory for the cartels and would set back action for many years. It seems very unlikely, therefore, that the High Authority and the Council will do more than postpone the issue of the export cartel with, at best, some statement which re-inforces their dislike of it.
It seems to me that the unfortunate effect of this action could be largely mitigated if simultaneously the High Authority would move, as it should in any case, on a few of the most flagrant domestic cartels. During the discussion with Spierenburg, he indicated his awareness of the need for early action in this field. Both he and, somewhat surprisingly, members of the British delegation, felt the cartel problem had not been attacked as vigorously as it should have been by the High Authority and shared our view that unless early and vigorous action were taken, the cartels would succeed in undermining the prestige of the High Authority.
Prices. Directly related to the problem of cartels is the current price situation within the Community. At the time of the opening of the common market for coal, maximum prices, by basin, were set by the High Authority. Since that time all coal has been selling at the maximum prices which are, at least in some cases, above the price of United States coal delivered, and stocks are now accumulating within the Community, particularly in Belgium and France. There would appear to be a fairly clear case for eliminating the maximum prices and seeing what happened. It seems probable that prices would fall. However, I gather from talking with Mr. Vinck, the Belgian director of the coal section, that the High Authority has already decided that it will not tamper with the price of coal until the winter is over. The coal price schedules have to be reviewed before the first of April and it seems probable that at that time the High Authority will experiment with free prices. Whether or not this results in any real competition will depend on what action is taken in the interim about the coal cartels. If, when maximum prices are removed, the price of coking coal were to go up, it seems probable that the High Authority would intervene and roll the price back to the present maximum. One of the great preoccupations within the Authority is the desire to reduce steel costs. The investment program for coal lays particular emphasis on the need to reduce the cost of coking coal to the steel industry and it seems unlikely that the High Authority would let any real increase in price take place.
[Page 345]With the opening of the common market for steel, the High Authority did not set maximum prices, as in the case of coal, but decreed that there should be published prices and a rule of nondiscrimination. The combined effect of these regulations and the existence of the steel cartels has been that the published prices have not been changed but that steel is being in fact sold below the published prices with the real competition coming on freight rates, special services, etc. Prices are, therefore, discriminatory as well as competitive. The pricing policies resorted to by the steel producers clearly violate the Treaty. However, the High Authority, given its existing regulations, does not wish to rule against the various methods by which steel is being sold at a discount, since the result would be to support the published prices of the steel producers which it feels are too high and should be lowered. At the present time the High Authority is giving thought to revising its regulations and permitting prices to fluctuate within X percent of the published prices, with the added provision that if during a specific period of time Y percent of the sales are made at a price lower than the published price, the lower price automatically becomes the published price.
U.S. Loan. I did not discuss in any great detail the negotiations for a United States loan since I did not want to cross wires with any discussions which may be going on between Mr. Bruce and Mr. Monnet. However, in a conversation with the director of the finance division of the High Authority, M. Guyot, I did explore, in general terms, the type of investment policy which the High Authority has in mind. In brief, the High Authority and, I believe, the Council of Ministers have approved a broad statement of principles to govern investment. The principal objective is to lower the cost of steel. This will be done by modernizing and re-equipping the steel mills and by seeking to raise productivity in the coal and iron ore mines. The emphasis in steel is clearly on cost reduction rather than on an expansion of production although a modest expansion is foreseen (50 million tons in 1957 as compared with an annual production of approximately 42 million tons in 1952). It is interesting and perhaps revealing that although they are said to have been arrived at independently, the High Authority’s estimate of need in 1957 corresponds almost exactly with the production increases already planned in the steel industries.
There is much more emphasis on the need for increased production in coal, particularly coking coal, and again great emphasis is placed on the need for more efficient production and lowering of costs. The target for 1957 is 285 million tons as compared with production in 1952 of approximately 239 million tons.
- A covering letter to Moore enclosed a copy of this memorandum to Lincoln Gordon and indicated that it had been prepared following a 2-day visit to Luxembourg. Copies were also sent to Tomlinson, Eisenberg, Leddy, and Hulley. The covering letter and the enclosure were sent from the Embassy in London, where Camp apparently stopped following her trip to the High Authority in Luxembourg.↩
- This is a reference to despatch 2189 from London, Dec. 17, which included a lengthy analysis of the question of British association with the European Coal and Steel Community. (850.33/12–1753)↩