Memorandum of Conversation 24a
Lord Halifax25 called at his request upon the Secretary this afternoon. He referred to a personal note from Mr. Bevin to Mr. Byrnes, dated January 24,26 regarding German reparations and the level of German industry. He stated that as he understood the problem, the British thought they had reached an agreement with the United States and the Russians and were going to take a certain figure—what they called the retaining level—7.5. That did not mean the Germans would be allowed to make that. The agreement was that we would allow the Germans to make 5.8 and see how they got along. Now the question came up what to do with all the other steel using plants. As he understood it, the agreement was that all those plants would be rationed on the basis of 5.8, but not destroyed or dismantled to the level of 5.8 yet. They would be kept in existence at the level of 7.5. Then if we found we couldn’t get along with 5.8 and were faced with mass unemployment, we could always keep an eye on the potential and let it expand to 7.5 million.[Page 494]
The Secretary replied that that was his understanding, too. He stated that he discussed the situation with General Clay in London and everything was so definite that it looked like a closed case. The agreement had been reached after months of discussion among the British, Americans, French and Russians—production 5.8 and capacity 7.5. General Clay said there was no question about the agreement, but the British representative, Mr. [General] Roberston, subsequently placed a different interpretation on it. This action on the part of the British representative disturbed General Clay and the French representative, as the Soviets could cite this position as a precedent in subsequent matters and take an interpretation different from the other three members. On the merits of the agreement General Clay said that there was not a chance in a year and a half to reach 5.8 production. Therefore, so far as steel was concerned it was academic. His view was that a peace treaty would fix anything for the future. This agreement could be construed only for the present and for the production during the time we were in control.
The Secretary said that he agreed with Mr. Bevin’s views as set forth in his note and would so advise General Clay. Unless it was in conflict with what General Clay positively agreed, this represented his opinion of what it ought to be. The Secretary added that he had explained the whole situation to Mr. Bevin but Bevin was afraid that it is to be used as a yardstick for all industry besides steel.
Lord Halifax stated that Mr. Bevin was most anxious that the British and Americans do not take divergent positions on this, which may affect European economy.