MSA telegram files, FRC Acc. No. 54 A 298, “Paris Repto”
No. 8
The Deputy United States Special
Representative in Europe for Economic Affairs (Porter) to the
Chairman of the Council of the Organization for European Economic
Cooperation (Stikker)1
On instructions of my govt, I am taking this opportunity lay before you certain views about the future development of the Eur economy which may be helpful to the govts represented in the OEEC in considering the action they will take individually and as members of the various Eur regional org which now coordinate Eur action in the econ and finan field.
In the mutual security program, as in the Marshall Plan, the people of the US are assisting West Eur in building strength on the understanding that they are providing out of Amer resources that margin between the maximum that Eur countries can provide by their own efforts and the minimum essential to achieve our common purposes.
The US Govt has felt that the most rapid steps possible shld be taken in Eur to achieve a dynamic expanding economy based on increased productivity. By so doing, Eur will be doing the maximum it can to help itself.
It has been our view that the building of a single market will hasten the achievement of this goal. Real progress has been achieved. The most important step taken by the OEEC in this connection has, we believe, been the establishment of the EPU and the progress made in the difficult task of cutting down quantitative restrictions which have been impeding the flow of intra-Eur trade and thus contributing to inefficient production. However, we all know the difficulties that are being experienced in merely maintaining the progress that has been made so far. On a more limited geographic basis the Schuman Plan, when it comes into operation, shld go very far indeed in providing for the free play of competitive forces among the coal, iron and steel industries of the six countries participating in the plan.
More recently, discussions among these same six Eur countries have developed a bold and imaginative plan for a Eur def community. This community gives promise of promotion, in its econ and finan arrangements, many developments toward an integrated [Page 9] economy which wld be close to the goal of full econ unification. These discussions represent hopes as yet unfulfilled but the hopes were only recently given strong endorsement by the members of NATO mtg in Lisbon and they have the full support of the US. We look forward to the early conclusion and formal approval of these plans so that our hopes may soon become a reality.
In considering the question of how best to move toward the goal of greater unity, it is useful, I think, to conceive of two different circles of integration. Among certain countries on the Eur continent, as foreshadowed by the Schuman Plan and EDC initiatives, it may soon be possible to build a truly integrated community. Such an integrated community cannot be maintained, however, unless its various parts pursue common finan and monetary policies designed to prevent one part of the community from undergoing rapid increases in inflationary demand while another part of the community is trying to put the brakes on inflation. Without these measures it will never attain its important goal of the expanding economy necessary to the creation of an adequate def and to provision out of its own resources a rising standard of living. A truly integrated community wld have a common commercial policy; tariffs and quantitative restrictions on trade wld have no place within such a community. The community might find it desirable in due course to pool its hard currency reserves and wld presumably pool some part of its budgeted revenues in order to cover the costs of the common def force as well as other services operated from the community level. This in turn might lead to common arrangements for the assessing and collection of public revenues supporting such a common budget. I have mentioned these possibilities as illustrations of the lines along which a continental Eur community might develop. We are prepared to support such developments.
The second circle of integration in which we believe further progress can be made is in the broader Eur region which the OEEC represents in the North Atlantic area covered by NATO. We believe that the OEEC and NATO can provide an even more important link among their members than they have in the past and that these ties will be strengthened rather than weakened by the development among some of their members of more far-reaching arrangements such as Schuman Plan and the EDC and even further federation.
The OEEC in the coming year has many important tasks before it. One of the most urgent is the adoption by the OEEC of effective measures to provide a satis functioning of the EPU. Another major related task before the OEEC in the coming months is to proceed with the liberalization of trade and the establishment of a commerical policy board. It is questionable whether the OEEC will be able [Page 10] to effectively perform either of these tasks, or the vital job of maintaining social stability throughout the OEEC area, unless it makes specific arrangements for insuring the necessary degree of finan stability in the member countries. The current inflationary sitn in several of the member countries is a clear threat to the welfare of the whole community.
These and possibility of other measures to facilitate Eur econ integration that may be adopted by the org, will facilitate the expansion of production. But there are many other things that can be done that will contribute directly to this goal. As the Council of Mins pointed out in its declaration of Aug 29, 1951 the necessities of the DPC program can only be met without reversing the upward trend in the restoration of Eur econ health if production in basic industries, coal in particular, is sharply increased over the next five years. The council at the same time emphasized that increasing productivity is the most essential element in expanding production. There is little doubt that if existing resources of manpower, management, materials and capital resources cld be brought into a relation of optimum efficiency in many branches of Eur industry and agric, the results wld be a substantial expansion in production. The preparatory studies on the econ expansion objective carried on within OEEC need to be translated into concrete programs for expanding the output of basic industries.
The confidence of labor and management that these increases in output will be equitably distributed is an important prerequisite for such a development. Natl and internatl action will also be required to eliminate restrictive business practices which seriously reduce the incentive to increase production and to reduce costs and prices. OEEC will also be concerned in the months ahead with an acceleration and expansion of the work already in hand to insure that scarce materials are used for the best purposes of the area as a whole. In part this is a problem of allocation of commodities like coal, in part a problem of common standards of end-use control on short supply commodities such as copper, and in part more adequate systems of price control.
Another area which we feel needs more attention and renewed effort is the whole question of utilization of Eur manpower. Much remains to be done in overcoming the obstacles which have resulted in the paradox of idleness in some areas and limitations on production in others caused by lack of manpower. An attack needs to be made on the obstacles to labor mobility, particularly as they impede essential production, and we believe that more attn shld be given to providing more adequate housing as an aid to the movement of labor.
[Page 11]These are the principal lines of endeavor which we feel cld be pursued by the org in the coming months so as to maintain the impetus of the Marshall Plan and to continue the bldg of a strong and unified West Eur economy.
The work that will be undertaken by OEEC in these and other fields will of course be coordinated as in the past with what is done by other internatl orgs. The recent Lisbon conf of the NATO drew attn to the possibility of working out closer cooperative arrangements with other bodies, particularly the OEEC. We suggest therefore that OEEC in considering its future tasks will wish to examine its relations with the NATO, a problem that increases in importance as a result of the forthcoming transfer of the NATO to Paris.
US support to the recovery of Eur and to its rearmament has been on an unprecedented scale because of our belief in the importance of Eur to the free world and in the vigor and sincerity of Eur’s own efforts, without which US aid cld do nothing. As we have progressed together in building the polit and econ foundations of the North Atlantic community, the opportunity has arisen for more fundamental and far-reaching changes to be made by the Europeans in their polit and econ institutions in order to achieve for themselves the greatest benefit from the outstanding human and material resources which they possess. The US Govt and people are confident that Eur will seize and make the most of this great opportunity.
- This message, which was transmitted to the Mutual Security Agency in telegram Repto 1088 from Paris, Mar. 7, was sent to Stikker on May 7 with the approval of Draper.↩