Foreign Relations of the United States, 1952–1954, Germany and Austria, Volume VII, Part 2

862A.00/3–2553

No. 572
Memorandum by the United States High Commissioner for Germany (Conant) to the Secretary of State¹

confidential

Bonn, March 25, 1953.

Subject:

• Problems associated with strengthening the economy of the city of Berlin.

As you may recall, I indicated by cable after my first visit to Berlin that I was very much concerned with the problems associated with strengthening the economy of the city, particularly having in mind the importance of developing its industry and thus assisting in the attainment of the objective of economic sufficiency.

During my second visit to Berlin, I was further impressed by the efforts which have been made by our government to attain this objective, and particularly by the vast amounts of money which we have made available for the maintenance and recovery of the city. I am equally impressed with the facts that this load is a continuing one, and that we have committed ourselves heavily to the proposition of keeping Berlin alive and open.

I am of the opinion that we should make every effort to lighten the resulting burden upon American tax payers, by assisting Berlin to help itself to the maximum possible degree, and to use such assistance as we give it, to this end.

The purpose in this memorandum is to raise the question as to whether the Defense Department, by some change of procedures, could increase greatly our Armed Forces procurement in Berlin.

This matter has been the subject of considerable thought by the staff in Bonn and Berlin and I am satisfied that, in order to secure serious consideration of any effective change in this direction, decisions will have to be made in Washington rather than here.

Comments made herein apply both to DM procurement and to dollar procurement.

Regarding DM procurement, under the existing directives to the military procurement personnel, relatively little procurement is being placed in Berlin notwithstanding the desire of the military to prefer Berlin sources where possible.

There are three possible ways in which the Army might proceed to alter this situation. The first would be to declare Berlin a separate “bidding area” and require competitive bids within Berlin itself but not require that these bids be competitive with other parts of Europe.

The second possibility is where procurement officers receive bids from a Berlin bidder which are appreciably higher than bids received in the FedRep area, the procurement officer be directed to renegotiate with the Berlin bidder, provided the discrepancy was within a reasonable limit, for example 10% higher. In this case the procurement officer would be directed to apprise the Berlin bidder of the disparity and offer him an opportunity to meet a lower bid. I have been told that the FedRep itself already pursues this practice in distressed areas, and I am informed we would expect no valid objection from the FedRep if there were complaints from West German business firms as to this new practice if it were adopted. It would be perhaps necessary to propose that procurement officers be directed to solicit at least one Berlin bid in all cases where Berlin industry was capable of furnishing the goods under procurement.

A third alternative is that a directive be issued by the Defense Department to the effect that a certain percentage of all DM procurement in certain commodity fields be placed in Berlin. The fields which have been suggested are as follows:

• Electrotechnics
• Fine mechanics and optics
• Furniture and wood processing
• Textiles and clothing
• Machines, steel and iron products
• Medical equipment and accessories

On basis our estimates, should the DM procurement herein suggested be utilized, I believe there might be opportunity for awarding Berlin bidders as much as 80 million DM per year.

Insofar as dollar procurement is concerned, it has been suggested by the staff that there might be a directive to procurement officers to procure 10 to 25 million dollars worth of goods exclusively in Berlin for FY 1954.

I am aware that these proposals cause inconvenience among the procurement services, and that these proposals are contrary to existing practice. However, in view of the substantial burden laid upon Americans by the Berlin situation, and of the fact that there are many commodities which Berlin can reasonably produce for our Armed Forces, not involving strategic risks, I feel it is our duty to utilize the productive capacity which Berlin has, that we should give it opportunity to produce what we need, and to provide employment for the labor force now unemployed.

If you thought well of these proposals it might be possible to arrange a conference when I am in Washington with Secretary Wilson for me to present the case for Berlin to him personally, or to whatever members of his staff you might designate.²

JBC

1. Attached to a memorandum from Riddleberger to Secretary Dulles, dated Apr. 1, which supported the position made by Conant. Riddleberger’s memorandum bore the handwritten notation by Roderic L. O’Connor “Sec says OK—RLO’C”.
2. Conant was returning to Washington in connection with Chancellor Adenauer’s visit to the United States.