The British Secretary of State for Foreign Affairs (Bevin) to the Secretary of State31
I have received from Mr. Winant a personal note from you32 in answer to my message of January 24th on the subject of reparations and the level of Germany industry.
I appreciate the efforts you have made to enable your Delegation and ours to reach a common understanding on this matter but I fear that there are still certain misunderstandings between us which require clarification.
You state that your view is that the difference between 5.8 million and 7.5 million tons is the present margin above permitted production required by German technology to allow for maintenance and repairs. While we do not deny that the need for repairs may temporarily reduce steel output, we have maintained throughout that Germany must be allowed to retain capacity to produce annually 7.5 million tons since we believe that this is the minimum figure which she will need if she is to have any chance of achieving a balance of payments. I could not, therefore, agree to your proposal to leave in other industries a margin which was merely put in to ensure the production of a permitted output which in turn was based on 5.8 million tons of steel production.
My understanding of the discussions which took place between General Robertson and General Clay on this subject is that the former agreed that the economic directorate should produce a plan based on 5.8 million tons of steel for inspection by the Coordination Committee. The British representative on the economic directorate would take part in the discussions but would not be empowered to agree to the plan. General Robertson would make this provision quite clear [Page 499]at the Co-ordinating Committee, and would also state that he reserved to himself the right to reject the plan when it was submitted. General Clay apparently thought that this procedure would be helpful.
It seems to me that it is better for us to let the matter rest where it is for the time being, but I earnestly hope that if we are able to show that a plan which is based on the level of steel-using industries being reduced to a capacity consistent with a steel output of 5.8 million tons is unworkable from the point of view of achieving a balance of payments, you will give your support to the upward revision of capacity levels generally.