862.50/3–846: Telegram

The United States Political Adviser for Germany (Murphy) to the Secretary of State

confidential

729. The Coordinating Committee on March 7 reached almost complete agreement on level of industry for Germany. With exception of small difference on electric power installed capacity and subject to review by French and British Governments, agreement was obtained and agreed figures will be referred to Control Council.

Economic Directorate meeting ending 3 a.m., March 6th, reached level of industry agreement on basis of following assumptions: (1) Use of German population figure of 66.5 millions; (2) treatment of Germany as single economic unit; (3) acceptance of German exports in international markets.

Production of arms, ammunition and implements of war, aircraft and sea-going ships is prohibited. In addition, industrial capital equipment for production of following is to be eliminated: synthetic gasoline and oil, synthetic rubber, synthetic ammonia, ball and taper roller bearings, heavy machine tools of certain types, heavy tractors, primary aluminum, magnesium, beryllium, vanadium, produced from Thomas slags, radioactive materials, hydrogen peroxide above 50% strength, specific war chemicals and gases, radio transmitting equipment. However, production facilities for synthetic gasoline and oil, synthetic ammonia, synthetic rubber and ball and taper roller bearings, will be temporarily retained to meet domestic requirements until necessary imports are available and can be paid for. Steel production capacity of 7.5 million ingot tons and allowable annual production of 5.8 million ingot tons subject to annual review was made part of plan. Annual consumption including exports of products containing following metals is fixed at: copper ore 40,000 tons, zinc [Page 521]135,000 tons, lead 120,000 tons, tin 8,000 tons and nickel 1,750 tons.

40% of 1936 production capacity (measured by 1936 sale values) will be retained in following basic chemicals: nitrogen, phosphate, calcium carbide, sulphuric acid, alkalis and chlorine. 70% of 1936 production capacity will be retained for other chemicals such as those used for building supplies, consumer goods [items] plastics, industrial supplies and other miscellaneous chemical products. 31% of 1938 capacity of heavy engineering industries producing metallurgical equipment, heavy mining machinery material handling plants, and heavy power equipment will be retained. Other mechanical engineering industries will be retained at 50% of 1938 capacity.

50% of 1938 production capacity will be retained in electrical engineering industries. Capacities to produce heavy electrical equipment will be restricted to 50% of 1938 production. Export of specified types radio receiving sets is forbidden. Capacity will be retained to produce annually 80,000 autos consisting of 40,000 passenger cars and 40,000 trucks and for 4,000 light road tractors. No production of motorcycles with cylinder sizes of 250 cubic centimeters will be permitted. Capacity to produce annually 10,000 motorcycles with cylinder sizes between 60 and 250 cubic centimeters will be retained.

Locomotive production capacity will be retained exclusively for repair of existing stock to build up pool of 15,000 locomotives in 1949. A later decision will decide on production of any locomotives after 1949. Capacity will be retained to produce annually 30,000 freight cars, 1,340 passenger coaches and 400 luggage vans.

Capacity to produce annually 10,000 light agricultural tractors will be permitted. Capacity for production of other agricultural equipment is to be retained at 80% of 1938 levels. Capacities for transport and agricultural machinery will allow production of normal quantities of spare parts.

Capacity will be retained to produce precision instruments in value of 340,000,000 Reichsmarks (1936 value) of which 220,000,000 is for domestic use and 120,000,000 for exports. This industry may be further reduced if recommended by the Committee for Liquidation of German War Potential.

Coal and potash production will be maximized with estimates that 155,000,000 tons hard coal equivalent can be obtained including 45,000,000 tons for export. Rubber needs in 1949 estimated at 50,000 tons including 20,000 from reclaimed and 30,000 from imports. Pulp paper and printing needs estimated at 2,129,000 tons plus 400,000 tons for export. Textiles and clothing industries estimated at 665,000 tons of fiber based on 10 KG per head for 1949, including 2 KG for export. Boots and shoes requirements estimated at 113,000,000 pairs. US delegate stated that above four estimates not considered as limitations.

[Page 522]

Building industry will be allowed to develop within limits of available resources and licensing system. Except for cement, existing capacity for building materials will be retained.

No limitations except available resources are placed on following industries: furniture and woodwork, flat glass bottle and domestic size ceramics, bicycles. The exports and imports aspect of the plan was reported in our cable 558, February 19.

Economic Directorate stated that after approval of [plan] existing capacities of separate branches of production should be determined, and a list of enterprises available for reparations committees [compiled]. After agreement a full description of various features of [plan] will be prepared by Economic Directorate.

Coordinating Committee discussed following disagreed items:

(1)
Pharmaceuticals. Here British, US and Soviets agreed to total production of 350,000,000 RM value with 120,000,000 for export. French agreed on capacity for domestic but requested export limitation of 50,000,000 reichsmarks.
(2)
Dyestuffs. Annual production estimated as follows: US 60,000 tons, British 50,000, Soviet 24,000 and French 20,000.
(3)
Synthetic textiles: US proposed 265,000 tons, British and French 250,000 and Soviet 31,000.
(4)
Cement: French requested 8,000,000 tons limitation, Soviet 6,000,000 and British and Americans no limit.
(5)
Electric power installed capacity in million KW was: French 10.3 American 9.7, British 9.6 and Soviet 7.7.
(6)
Machine tools: British, American, Soviet agreed to retain 12½% of 1938 capacity with additional instructions on type and size of machine tools. French delegate proposed 8%.

After prolonged debate in which General Clay skillfully kept discussion going when it appeared that British and French delegates preferred to postpone decisions to allow time for any relay of problems to their govts, the following compromises were suggested: pharmaceuticals 332,000,000 reichsmarks, dyestuffs 36,000 tons, synthetic textiles 185,000 tons, cement 8,000,000 tons and machine tools at 11.4% of 1938 capacity. Agreement was not reached on electric power capacity with Soviet proposing figure of 8.5, Americans 9.0 and with both French and British having reservations on 9.0. In addition French stated they would have to refer compromise on pharmaceuticals and dyestuffs to their govt for approval.

During debate Sokolovsky pointed out use of sulphuric acid in producing synthetic textiles and thus to high war potential aspect. Robertson agreed but pointed out that Germany will not be able to pay for sufficient imports of synthetic fibers and that all war potential cannot be removed.

On cement figure Sokolovsky asked explanation of US estimated requirement of 3,000,000 tons for new industrial capacity and 1.8 [Page 523]million tons for occupation armies. Sokolovsky argued that this would allow sufficient cement for concealed fortifications and that this level was not required for peaceful German needs.

On electric power Clay proposed and Sokolovsky agreed to exclude hydro-electric installations from reparations.

Clay suggested that in view of reduction of exports required in making compromise further investigations will be required to determine where this can be made up from other industries. Robertson pointed out that estimates would have to be increased upwards if population turned out to be in excess of 66.5 million.

It was agreed in view of French and British reservations and absence of final agreement on electrical power that no figures would yet be made public and that communiqué should merely mention that statement had been referred to four Govts.

Sent Dept. as 729, repeated Brussels for Angell as 29, Moscow as 66, London as 128, Paris as 77.

Murphy