The Secretary of State to the Ambassador in France (Caffery)
1601. ReDeptel 1585 Apr 9.40 1. Technical Financial Subcommittee has had three meetings with Monnet, Monick, Kaplan and other members French Delegation. Meetings devoted to general presentation present French economic picture and Monnet’s plans for 1946–50. French have made no formal request for any sum, but are apparently proceeding on theory that their exchange deficits tell their own story. Job of detailed examination of French data delegated to two joint working groups: One to examine economic data (production, foreign trade, investment, consumption) and another to examine financial data. American side of working groups will complete reports this week.
- Economic working group has held five meetings with Kaplan and other French technicians. Results of discussion and analysis French data not yet complete, but can be tentatively summarized as follows:
- General industrial production index was 62 (1938═100) at beginning 1946. Limiting factor this year and possibly well into 1947 will be coal supply. Present plant capacity considered adequate up [Page 427]to 100% 1938 industrial production; labor supply no problem until production well above 1938, and transport capacity can be kept ahead of production. Present rate coal imports 900,000 tons per month sufficient permit industrial production rise gradually to 80 before year’s end. French stress coal imports as worst immediate problem and urge 1,000,000 tons per month additional German coal beginning July 1 to permit production reach 100 this year. Prospects such increase appear very remote.
- Industrial production in 1947 expected average slightly above 1938 if coal can be imported at 1938 rate of 1,800,000 tons per month. Increase of production above this rate will require extensive investment in industrial plant and machinery, increase in energy supply and transportation capacity.
- French plan aims to increase industrial production to about 150% of 1938 level (115% of 1929) in 1950. In 1950, plan calls for steel production at 12 million tons, electric power at 200% 1938, coal at 65 million tons, transport at 150% 1938, and mechanical industry at 160% of 1938, including development of a sizeable machine-tool industry, and general modernization much of French industry to improve its competitive position in exports.
- Monnet says plan will require net increase industrial labor force by 2,000,000 (32% over 1938) by shift from agriculture, distribution and army, and by immigration. Plan calls for release 600,000 workers from agriculture by mechanization.
- Total new investment required 1946–50 to achieve planned production goals estimated roughly at $15.5 billion of which $2.9 billion imported equipment, largely from U.S.
- Plan calls for total of $10 billion of imports into French Empire for 4 years 1946–49, and annual exports from French Empire rising from $380 million in 1946 and $850 million in 1947 to $2 billion in 1949. Plan estimates total foreign financial aid required for 4 years 1946–49 at $4 billion, even after liquidation $1.9 billion of gold and public and private foreign assets.
- In appraising French need financial aid, economic working group concentrating on 1946 and 1947. French estimate financial need these 2 years of $2.8 billion will probably be substantially reduced by careful screening of import programs. Size of 1946–47 deficit much affected by modernization plan since $1 billion of 1946–47 deficit accounted for by equipment imports required by plan. Furthermore, domestic investment effort required by plan affects deficit by limiting availability goods for export.
- Financial working group has held three meetings with Monick, Guindey and others. Results summarized in following telegram.41