Foreign Relations of the United States, 1951, European Security and the German Question, Volume III, Part 2

462A.62B 31/6–2051: Telegram

The Secretary of State to the Office of the United States High Commissioner for Germany, at Frankfurt¹

secret   priority

Washington, June 20, 1951—8 p. m.

8697. Dept has review rec msgs re IZT as well as Kiefer–Miller memo Jun 9.² We appreciate capable handling of problem and concur recommendations contained last para Berlin 1514.³

A. Present Status Sov Restrictions.

Dept assumes that Sovs are in fact abandoning recently imposed certificate of origin requirements. If this later proves false, and more than very minor token quantities Warenbegleitscheinen held or returned for certificates of origin, believe you shld seek tripartite agreement to terminate IZT negots immed and to institute simultaneous selective embargo promptly at least in W. Berlin and as soon as possible in FedRep, accompanied by public statements indicating retaliatory purpose.

Moreover, Dept suggests discussions of experts re certificates of origin be delayed until you are satisfied Sov restrictions in fact lifted.

B. Guidance for IZT discussions.

If negots are continued, you shld seek achieve fol objectives in agreement (Dept recognizes HICOG prob already working with these objectives in mind; in absence details negots, we have stated these objectives as fully as possible.)

1. Control over export of strategic and short-supply goods.⁴ FedRep shld of course fully implement letter and spirit of COCOM policies and agreements, and shld avoid any commitments which might be embarrassing shld COCOM or international controls be extended in future. This means that exports of List II goods must be reduced to absolute minimum. Western countries in general must have first priority for any commodities required for defense purposes.

It shld be brought to attn FedRep that the fewer strategic items included in agreement, the less danger in next few months of serious trade disruptions or other consequences Kem Amendment implementation. Exceptions of NSC under Amendment must be reviewed every 90 days by NSC. Dept seeking basis for best possible case to support continued exceptions for FedRep and can do this only if all possible efforts are made in negots by FedRep at this time.

2. Most Advantageous Economic Exchange. Dept is not convinced that past commodity exchanges in IZT have in balance worked to net economic advantage of FedRep and West Berlin. Dept will not be able permit HICOG approve IZT agreement which does not clearly provide economic benefits to FedRep and West Berlin at least as great as benefits accruing Sov Zone. No weakening our position this point shld be considered merely to conclude early agreement.

Although Dept does not have sufficient detailed info on proposed exchanges to reach definite conclusions, our impression is that commodity lists contained Kiefer–Miller Jun 9 memo prob do not provide sufficient benefit to West. Primary objection is that non-essential goods constitute too large a percentage of imports to balance exports of extremely essential and prob strategic nature. Also probable that considerable quantity such non-essential imports available elsewhere in Western World. Pls note fol examples:

a. Proposed imports of machinery and vehicles, 32 million clearing units and proposed exports of steel, steel products, machinery and rubber of over 200 million. Such exports appear precisely those most “sensitive” in strategic considerations. Can they be fully balanced by imports from Sov Zone of goods of equal essentiality (not necessarily machinery)?

You shld seek imports in machinery category of high proportion of essential machinery unavailable elsewhere, and in types complementary to those made in FedRep. Such purchases might be designed to obtain goods which Sov areas can spare with difficulty.

b. Agric imports, 93.5 million clearing units.

We note that 1950 imports included wine, tobacco and other nonessential goods, which obligated FedRep to deliver goods of equivalent value, typically demanded by Sov Zone largely in strategic categories. We recognize that agric imports, particularly to Berlin, must include certain non-essentials. We urge, however, that as large a percentage as possible be made up of truly essential items such as breadgrains, sugar, fats, etc. Urge also that consideration be given to seeking alternative Western sources for certain goods. Import into Germany of even token quantities of tobacco, for example, from the Sov Zone undesirable in view availability U.S. and other tobacco.

c. Glass and ceramics imports, 19 million.

Unless this item includes essentials, FedRep shld propose supply of approx equal value of non-essentials to balance.

d. What is included under misc imports, 45.5 million?

e. Dept pleased over proposal to deliver textiles to value of 25 million and receive textiles valued at 10 million.

3. Guaranteed participation for Berlin in IZT. Dept views deliveries from West Germany to Sov Zone as lever to guarantee continued deliveries essential commodities to Berlin from Sov Zone and sufficient participation Berlin firms in shipments to Sov Zone. We have noted that FedRep recently opposed specific listing of Berlin commodity breakdown in trade agreement. Whether commodities are listed specifically or not, HICOG shld endeavor make West Zone and Berlin deliveries to Sov Zone contingent upon participation West Berlin in IZT, with adequate means of measuring extent of participation at any time. Dept views this as surest method of obtaining economic benefits of IZT for Berlin.

4. Misc points

a. Continuing review of commodity exchange. We consider it extremely necessary that West Germans and HICOM be able at any time evaluate broad balance of Western receipts of essential goods against deliveries. This cld perhaps be accomplished through separate clearing accounts for commodity groupings of varying essentiality as well as by a continuing review of total commodity exchanges in each grouping. We have not been able to date satisfactorily to evaluate where West has stood in this exchange and consider it necessary that we be able to do so.

b. Escape clause for retaliatory measures. It is important that agreement be so worded that (1) retaliatory; measures against Sovs or East German interference with Berlin or other harassing tactics and (2) cessation of certain Western deliveries in event of Sov Zone short-fall in deliveries of particular commodities not precluded.

c. Proper licensing and credit procedures. It is necessary that proper licensing and credit procedures be established, to insure that all transactions between the two areas be recorded in the clearing accounts and that licensing controls permit timely regulatory action against excessive fluctuation in these accounts, as outlined in AGSEC(50)874/FOREX.⁵ Proper licensing procedures might also prevent undue accrual illegal DM balances in FedRep by Sov Zone.

C. Recommended Procedure.

In view of problems presented by Kem Amendment, you shld cable summary of IZT agreement drafts for Dept’s consideration prior HICOM consideration. If feasible, section summaries may be cabled separately as each reaches firm stage. Request you also cable summary or pouch detailed commodity breakdown of exchanges, even though these will not appear in final agreement.

We recognize this procedure may necessarily delay final approval agreement, but will do everything possible to expedite.

D. Gerhardt concurs.

E. Last message recd this subj prior completion this cable is Berlin’s 1514.⁶

Acheson

1. This telegram, drafted by Lind, Rogers, Montenegro, and Wyman, and cleared by EDS and RA, was repeated to Bonn, Berlin, London, Paris, and Moscow.
2. Not found in Department of State files.

3. Not printed; the last paragraph reads:

   “Taking all possibilities into account, we shld (a) go easy on approval Interzonal Trade Agreement in case it is perhaps too favorable, on balance, to East and/or contains some catch as yet undiscerned; (b) maintain our readiness to impose counter measures in both Berlin and Fed Rep if situation fails develop to our advantage; and (c) above all not show ourselves over-eager in reaching settlement merely for reasons expediency.” (460.509/6–1951)

4. For documentation on the policy of the United States with respect to the export of strategic and short-supply goods, see vol. i, pp. 993 ff.
5. Not found in Department of State files.
6. In a telegram received at 9:08 a. m. June 21 in the Bureau of German Affairs, Hays reported that since the Warenbegleitscheine were again being stamped without certificates of origin, the negotiations for a new interzonal trade agreement had been resumed. The High Commission had instructed the head of the West German delegation along the following lines: (1) the new agreement could be initialed but not signed until new interzonal trade ordinances were in effect providing the Federal Republic with control of practically all commodity movements, (2) some clause or exchange of letters must be obtained providing for free access to Berlin, (3) improvement in freight traffic with Berlin would be dealt with, (4) commodity agreement must not exceed 450 million units in each direction, (5) total swing in accounts must not exceed 30 million, and (6) two hard accounts for chemicals and machinery would be set up to facilitate controls. (Telegram 10311 from Frankfurt, June 20 462A.62B31/6–2051)