862.50/3–2246: Telegram
The United States Political Adviser for Germany (Murphy) to the Secretary of State
[Received March 23—9:25 a.m.]
844. Forty-fifth Special Coordinating Committee Meeting, convened to hear British report and complete discussions on level of industry plan for Germany, ended inconclusively after long debate when British and Russian members locked in difference over British insistence [Page 530] over principle of mandatory revision of plan should any of its fundamental hypotheses eventually prove false, and Russian desire plan remain unchanged until completion of reparation program. Earlier discussion led French member agree to General Clay’s compromise proposals reported in my 729, March 8, and at that time it seemed final agreement was near. However, discussion of contents of notification of agreement to Control Council revealed fundamental difference in British and Russian positions.
British member opened debate by stating his Government’s new plan must be regarded as whole; it was acceptable on assumption it was drawn on Potsdam principle that in present western boundaries Germany would be treated as economic whole; revision of western frontiers or treatment of Germany other than as unit would necessitate alteration of plan; plan based on premise German population does not exceed 66½ millions, and, exports sufficing to pay for necessary imports, there would be no charge on occupying powers; must be periodic review of plan as operating under elimination of war potential; agriculture and other peaceful industries should be encouraged. British member made clear that sole British conditions to acceptance of plan, including the figures to which he had been unable previously to give final approval, were periodic review and policy of revisions. He would suggest annual review of whole plan, first on January 1, 1947, and pointed out Coordinating Committee had already accepted principle of periodic review for steel.
French member recalled statement of French principles at March 8 meeting of Control Council70 and emphasized that [one and] one-half billion [RM] food imports must be maximum to be lowered as soon as possible, and 45 million tons of coal exports a minimum. He concurred with British in thesis that any partial changes of plan must be considered as to effect on whole plan, about periodic review and revision, and that any change of present German frontiers must entail revision of plan.
General Clay said he also understood failure to operate Germany as unit, either through lack of administrative apparatus or further change of frontiers, would make plan subject to revision; that, except as specifically stated in plan, agreed figures do not limit industry in Germany, but will permit reparations and that plan is subject to review.
Soviet member accepted plan under following conditions: any changes in detail can be made only after reparations effected; any modification in German economy must be only at cost of internal [Page 531] German resources, can not [be] any cost to occupying powers, and should not violate basic principles of Potsdam protocol.
British member said he had not proposed revision should be at expense of reparations, but did feel drastic alteration of western German frontiers could only take place with consequent adjustment of reparations plan.
After study of Soviet conditions, British and US members asked clarification of the first. Soviet member questioned necessity of now considering potential changes in western frontiers as prerequisite to approval of plan. He said although his first condition did not mean he opposed in principle any change in plan should one prove necessary, no change would be admissible unless reparations plan executed and then only on basis unanimous agreement in quadripartite organs.
British member proposed recommend to Control Council plan be subject to annual review in order that Control Council can decide what adjustments are necessary in case of non-realization of any of fundamental assumptions on which plan based. Soviet member countered with following: “Revision can take place should special reasons arise and on agreement by all four parties.”
Soviet member said Coordinating Committee was attempting to agree on acceptance of a plan for 1949, and consequently he could not see need of calling for annual review and revision; annual review of steel and steel products affected only capacities, and reparations are based on capacities. He asked whether colleagues understood any eventual changes should be only within limits of capacities. British member then agreed waive annual review provided his colleagues would agree review should be made, if one of them alleged fundamental changes necessitating alteration in plan. He further said he must reject whole plan unless colleagues accepted principle of mandatory revision on proof of changes or errors in fundamental assumptions of plan.
General Clay said he could not bind Control Council organs to such revision; that Coordinating Committee was attempting to agree now only to consider a revision, were circumstances to alter in such manner as to suggest need of revision.
Debate was long and tedious and, to give members opportunity to study carefully their positions with view to formulating them on basis permitting ultimate attainment of agreement as to review and revision of plan, Soviet chairman proposed and obtained agreement to interrupt discussion until next Coordinating Committee March 26.71