850.33/4–154
No. 207
The Assistant Secretary of State for
Congressional Relations (Morton) to the Chairman of the Senate
Foreign Relations Committee (Wiley)1
My Dear Senator Wiley: As you will recall, the possibility of a United States loan to the European Coal and Steel Community was presented to you as Chairman of the Foreign Relations Committee in the President’s letter of June 15, 1953. At that time the President cited the Community as, in his view, “the most hopeful and constructive development so far towards the economic and political integration of Europe” and one which “meets the often expressed hopes of the Congress of the United States.” He suggested in this context, that the financing by the United States Government or one of its agencies of a portion of the Community’s investment requirements “would foster European integration in a tangible and useful way.” A similar letter was addressed to Mr. Chiperfield.2
After replies to these letters had been received, preliminary discussions were held, at M. Monnet’s request, on the possibility of the United States Government extending a loan to the European Coal and Steel Community. While these conversations were carried on for the most part by Mr. Bruce, as the United States Representative to the European Coal and Steel Community, Mr. Dulles, Mr. Humphrey, and Mr. Stassen have also discussed the subject with M. Monnet in the course of visits to Europe.
On February 20, 1954, the United States Government announced its agreement to open negotiations in Washington to determine the concrete ways in which financial support will be extended to the Community, in keeping with the President’s view that such financing would contribute to European integration. M. Monnet has now [Page 376] been invited to come to Washington and discussions with this Government are expected to begin on April 6.3
The High Authority has an income from its levy on coal and steel production within the Community which, in currencies of the Coal and Steel Community member countries, is currently equivalent to approximately $50 million annually. Of this amount some $30 million is available annually to guarantee financial commitments assumed by the High Authority. It will also add to its income through the interest it receives on the loans which it extends. It is on the basis of this borrowing capacity, that the High Authority is seeking a loan from the United States.
The High Authority has made available certain information on the policies it intends to pursue with respect to the loans or guarantees which it will extend to coal and steel enterprises within the Community. In general, its primary objective over the next several years will be to contribute to the modernization and expansion of facilities for the production of coke, coking coal and iron ore, and thereby to increase productivity and lower costs. The accomplishment of this objective will assist Europe in strengthening its industrial potential for defense while also contributing to European welfare and vitality.
Information received from the High Authority describes its lending policies in the following terms:
“The High Authority intends to use all funds which it can borrow to supplement the financial means which the enterprises will be able to obtain either from their own resources or from the financial markets of the Community. In administering these supplemental funds the High Authority is not obligated, nor does it wish, to direct the investment activities of the enterprises. The enterprises will retain full initiative and responsibility for the development and execution of their investment projects.
“The role of the High Authority will be rather that of an informed and prudent lender. It will assure itself that the projects submitted to it constitute sound financial investments for enterprises operating within the competitive conditions of the common market, that the proceeds will be properly applied and that the prospective earnings of the enterprise support the expectation of amortization over a reasonable period.”
In light of the above information and in view of the recognized need, at the present crucial juncture, to demonstrate United States support for European integration, the Executive Branch has come to the conclusion that the United States Government should now make a loan available to the High Authority.
[Page 377]The Executive Branch contemplates for the calendar year 1954 a loan of $100 million to the Community, assuming that the outcome of the forthcoming negotiations is favorable. This amount would be made available from funds appropriated by Congress for the Mutual Security Program under the Mutual Security Act of 1951, as amended, and would be expended pursuant to section 2(b) of that Act. If funds are required for the loan from new appropriations for the fiscal year 1955, they will be requested from Congress and justified as in the case of other appropriation requests, and will of course not be committed by the Executive Branch until the necessary legislation has been enacted. The Executive Branch will also, at the appropriate time, consult with Congress on what further steps might be taken in support of European integration.
There are compelling reasons why it is urgent at the present moment for the United States to give tangible proof of its readiness to support the European integration movement and specifically the European Coal and Steel Community, the only European supranational organization in operation. Of first importance is the fact that the ratification process of the European Defense Community has reached a crucial stage in France and Italy, and it is believed that concrete action by the United States in support of European integration would have a favorable impact.
Another major reason for acting now is that the European Coal and Steel Community, while off to a good start, is entering a difficult phase of its career. It needs substantial resources at its command if it is to contribute further to the breaking down of national barriers and restrictive business arrangements hindering the flow of coal and steel, to the revitalizing of the European economy, and to a better way of life for the people of Europe. The ability of the Community to function as a truly federal and supranational entity in its relation with the member states and with the enterprises within its jurisdiction will determine not only whether it can achieve the specific objectives for which it was created, but also whether it will inspire further steps towards federation on the European continent. We are convinced that a loan from the United States Government to the High Authority can have a profound effect in contributing to the success of the Community and to European unity.
Representatives of the Executive Branch will be pleased to provide further information with respect to the loan negotiations, at your request.
Sincerely yours,
- Drafted by Boochever and cleared in draft with Corbett, Kirlin, Palmer, Gray, Glendinning of the Department of Treasury, and Bennett and Trisko of the Foreign Operations Administration. An identical copy of this letter was sent to Representative Robert B. Chiperfield, Chairman of the House Foreign Affairs Committee on Apr. 1. (850.33/4–154)↩
- For information concerning these letters, see Document 203.↩
- For information concerning these arrangements, see Document 209.↩