Foreign Relations of the United States, 1946, The British Commonwealth, Western and Central Europe, Volume V

862.602/11–2346: Telegram

Mr. Donald Heath, Counselor of Mission in the Office of the United States Political Adviser for Germany (Murphy), to the Secretary of State

secret
urgent

Berlin, November 23, 1946—11 a.m.
[Received November 23—7:18 a.m.]

2708. Personal for Ambassador Murphy only for possible communication to Thorp, Vernon,¹ and Terrill.

I understand that General Draper will shortly send wire to General Clay giving details of proposal made by Sir Cecil Weir² for common decartelization policy in the two zones. The substance of these conversations and issues raised are, I understand, as follows:

Conversation between Draper and Sir Cecil Weir concerned possibility of agreement to decartelization law for both zones. Weir agreed to inclusion of express prohibition of cartel practices including all definitions contained in tripartite and US unilateral drafts. He agreed to declaration that all economic enterprises employing, directly or indirectly, more than ten thousand persons are excessive concentrations of economic power and to prohibition of German participation in international cartels in same terms as tripartite and US unilateral drafts.

Principal point of difference is that British would insist upon exemption of enterprises already taken into control by British military govt, viz., the coal industry and iron and steel industry and presumably such other industries as might be taken under control in line with Bevin’s statement of October 22.³

This raises three policy questions on which presumably Washington advice would be needed:

1. What would be the effect of adoption by parallel action in British and US zones for bi-zonal application of law which is indistinguishable in essential respects from that already agreed in quadripartite discussions by US, France, and Soviet representative: Weir stated directly that British objection to quadripartite draft was not actually to mandatory standards or anti-trust prohibitions but lack of confidence that Soviets would abide by quadripartite decisions if quadripartite law passed. Says that British will not agree to quadripartite law without economic unification of Germany and Soviet divestiture of legal title to plants they have taken through Soviet A.G.⁴ in Russian zone. His explanation of difference between Soviet seizure and British seizure is that British have put title in British zone commander and intend this to be temporary and do not intend to take title in the British Govt.

2. Second question is whether agreement would be proper in view of British insistence upon exception of their previous unilateral seizure of industries which Weir stated was necessary because British Govt might order nationalization of these industries. If this exemption of industries seized or later to be seized by British action for possible nationalization was recognized by US, would this not to a great extent nullify effectiveness of decartelization program? Would not bi-zonal agreement with above exemption tie action in US zone to those procedures which would be agreed upon for both zones while at same time British were not tied to bi-zonal agreement before undertaking nationalization measures? Weir has made no indication that he would subject possible nationalization to bi-zonal agreement but has indicated if it came it would be governmental order over which British authorities here would have no control.

3. A third question was raised by British draft proposal but not pressed by British representatives, viz., the question of making the law a bi-zonal law with execution controlled by joint military govt board.

There is another observation to be made both with respect to Weir’s proposals and our own unilateral draft law. Neither contain the list of firms presumptively subject to deconcentration which was a feature of the proposed quadripartite law. Without such a list and with only the 10,000 rule on size, very few firms now operating in Germany would be presently covered by the law, especially if exemption of iron, steel of iron, steel and coal firms in British zone were upheld.

Final draft of cable sent to Clay may not raise these issues in detail and may be delayed. Hence this telegram for advance confidential information of yourself and possible officers in Department working on decartelization problem.

Heath

1. Raymond Vernon, Assistant Chief, International Resources Division.
2. President, Economic Sub-Commission, British Element, Allied Control Council for Germany.
3. Parliamentary Debates, House of Commons, 5th series, vol. 427, col. 1515.
4. Soviet Industrial Corporations or Trusts, abbreviated as SAG (Sovietische Aktien-Gesellschaften).