840.50 Recovery/11–347
The Under Secretary of State (Lovett) to the Chairman of the CEEC Washington Delegation (Franks)
Informal Aide-Mémoire
In the course of the discussion which I had with you and your colleagues on October 24, I touched upon certain points raised in the unofficial aide-mémoire which you presented to me on October 22. An informal indication of present thinking on certain of these points may be helpful to you.
There is no doubt in my mind or in the minds of those associated with me that the program must be designed to achieve genuine recovery; it must not be a mere program of temporary relief. The approach to a solution must be neither half-hearted nor piecemeal.
In my judgment, the report of the Paris Conference is a well reasoned analysis of the problem and presents fundamental lines of action for the achievement of genuine European recovery.
In considering the assistance which the United States might reasonably give in the execution of a specific program falling within that broad framework, we, on our side, must give careful thought to additional factors. The capacity of the United States to continue to export far larger quantities of goods than it imports is strictly limited. We cannot assume unlimited obligations for meeting the balance of payment deficits of other countries. Many of the commodities most essential to European recovery are in critically short supply, not only in Europe and in the United States but in the entire world. If we were to make more dollar assistance available than can be honored in the form of goods, the additional assistance would be purely illusory and [Page 462] would merely contribute to an undesirable inflationary spiral in world prices.
I recognize that the problem of European recovery has both a commodity aspect and a financial aspect. I am hopeful that a program of assistance from the United States can be worked out which will constitute our proper contribution, when considered from either point of view, to a total program which gives real promise of success. But this cannot be merely an American program.
In our opinion it calls for prompt and vigorous steps to restore internal monetary and budgetary stability by the participating countries. As your report points out, (paragraph 65) “the success of the program depends on such stability”.1 Furthermore, the most intense efforts will be required on the part of the European countries, both individually and collectively, to increase their production and their exports if sufficient means of payment are to be found to finance their other requirements. Other countries, especially in the Western Hemisphere, also have a part to play. We recognize the desirability of obtaining flexibility to permit procurement in such countries, in certain circumstances, particularly of commodities not adequately available in the United States, but it is also our hope that means can be found of obtaining at least some share of supplies for Europe from third countries without payment in dollars.
I am hopeful that, even with respect to that portion of United States aid which might be in the form of commodities, procedures can be developed which will preserve to the maximum extent the flexibility of private trade and the preservation of normal trade channels. It is clearly basic to the entire program that exports from the European countries be rapidly developed and that these exports be of a character which can continue and expand after special United States assistance to European recovery comes to an end. Any conditions as to the use of materials supplied by the United States in the export trade of the participating countries must be worked out with this basic objective in mind.
I am in agreement with your point that restrictions imposed on the use of local currency arising from United States assistance should not interfere with or prejudice the economic and financial control of the economy that must be exercised by the Government of each country. It is my hope that formulae can be mutually agreed upon between this Government and the Governments of the participating countries with respect to the use of these funds which will promote and not interfere with the overall objectives of European economic recovery.
[Page 463]Although I am sure you are fully aware of the controlling voice the Congress will exercise in these matters I mention this factor again to emphasize that my comments are merely an indication of the present trend in formulating the recommendations of this Department for presentation to the Congress.
- Reference is to Committee of European Economic Cooperation, vol. i, General Report.↩