Foreign Relations of the United States, 1947, Council of Foreign Ministers; Germany and Austria, Volume II

862.60/8–2447: Telegram

The Ambassador in the United Kingdom (Douglas) to the Secretary of State

secret
urgent
niact

London, August 24, 1947—3 a.m.

4586. I. In accordance your instructions and subsequent US–UK agreement, Hoyer-Millar and Martin gave Benelux representatives opportunity this morning to examine appendix A of agreement. Session was friendly and without incident.

II. Now appears possible to complete discussions of level of industry at session starting 11 a.m. August 24 or possibly at afternoon session same day. Thus far have had nothing to report on US–UK plans for administration German coal mines. As result, prompt completion of talks here may be delayed. Appreciate every effort your part to transmit status Washington discussions this subject on urgent basis. No reports of any sort yet received on progress Washington discussions. (Reference Embassy’s telegrams 4579¹² and 4577, August 22¹³).

III. Full agreement reached with UK on responses to French statements of yesterday. Douglas opened afternoon session tripartite talks with reply to Massigli’s statement of yesterday. He assured French of long standing and continued sympathy of US for French security and access to Ruhr production referring to Secretary’s statement at Moscow. He denied any intention giving Germany priority and said French “conditions” on coal, Ruhr, etc. were outside scope of talks. In addition he pointed out importance of parallel recovery German industrial production with that of Europe for European rehabilitation, to make possible a democratic Germany, and to relieve US–UK financial burdens. Urged French to use explanations given them in London to reassure French people as to our intentions.

Jenkins then replied along lines paragraph VI Embassy’s telegram 4579, August 22 to Alphand’s statement of yesterday. He pointed out that French “conditions” were outside scope of discussions and corrected factual statements by Alphand indicating possibility we would give priority for German recovery. In conclusion, he suggested French proceed to exposition of “minor technical comments on level of industry plan itself,” which was agreed. After brief misunderstanding, his statement that we were ready to discuss coal and coke allocations with French and consider revision of sliding scale, it was made clear that French should address themselves first to bi-zonal authorities.

IV. Alphand stated that in considering the French comments on the levels, the conditions outlined the previous day should be “borne in mind.” To start with they desired that the levels for steel, machine tools, tar distillation, dyes and chlorine be permanent limits on production.

a. With respect to the level of 10.7 million tons for steel, it could be accepted by the French but they considered that the present zonal capacity was 22 million tons rather than 19.2 million tons.

b. Alphand said that Germany required a stock of only 800,000 machine tools which could be maintained by annual production of 32,000 rather than the 48,000 contemplated.

c. Tar distillation. This process should be strictly reduced to German needs for briquette, pitch, road needs, etc., and capacity should be limited to one million tons with exports of three to four hundred thousand tons of raw tar.

d. Dyes. This industry which was a spearhead of German infiltration abroad and a product neighboring on war production should be limited to the March 1946 level of 60 percent of 1936 with 15,000 tons allowed for exports per annum.

e. Chlorine should be limited to 70 percent of 1936 production as against 60 percent of the 1946 plan. However, caustic soda capacity should be retained until 50,000 tons capacity can be erected outside of Germany.

(Comment: At a meeting with the British after the full session, we agreed that no decision on permanent production limits could be made until the peace treaty and that we considered the present plan only a determination of amount of existing capacity to be retained in Germany. US took position that no concessions could be considered since there does not now appear to be in our view on this account any danger to French democracy or the Marshall plan.) The reasons for our conclusion were not communication [communicated] to the British. (UK prepared to make some concessions if necessary to appease French but thus far not very vigorous or specific. It is our impression that the French request for a reduction in tar distillation and chlorine arises from a technical misunderstanding as the bi-zonal plan provides approximately the capacity they suggest.)

V. The French also said that under-evaluation of existing capacity made the capacity which should be available for reparation removal in the engineering, chemical, cement and non-ferrous metals industries larger than the plan indicates. With respect to machine tools, they argued that the plan does not (as the quadripartite plan of 1946 did not) take into account machine tools in plants employing less than 25 workers. This, together with the under-evaluation previously mentioned, and their desire to consider the useful life of a machine tool 25 years as against US-UK compromise estimate of 22 years, lead them to assert that removals would be about 300,000 machine tools leaving an additional 350,000 tools which they considered surplus under the bi-zonal plan. Removal in chemicals could be greater if a detailed examination were made of the various branches of the industry. French also questioned use of rated capacity figure for cement.

They asked that reparation availabilities from the copper refining industry be increased 30 to 50 percent and those from the leading refining industry by 20 percent.

(Comment: It was agreed in the meeting with the British after the full session that we would recognize the under-evaluation charge by indicating to the French that the plan is one for retaining capacity and if we discover there is more capacity available than is now believed, it will be made available for reparations, but we will make clear that the bi-zonal authorities must themselves be the judge of capacity. It was also agreed that we would tell the French of our willingness to make a survey of surplus machine tools in small plants at some later time and that we would list any surpluses found for reparations. The fact that the rated capacity shown for cement results from a year long quadripartite argument and is only sufficient to produce the amount of cement agreed to be required will also be explained to the French.)

VI. Alphand indicated that the French were not opposed to revision of the prohibited industries. They desired that electronics industry also be prohibited since electronics were likely to be weapons of a future war. If this were done, it might be possible to relax the restrictions on synthetic ammonia and high seas shipping. The French would be willing to re-examine the list of prohibited and temporarily maintained industries.

(Comment: We agreed with British to explain our position on these industries indicating our willingness to include radar among the prohibited industries but not common electronic parts and devices. The decision, however, would be deferred as agreed in the bi-zonal plan.)

VII. Accordance instructions Department’s telegram 3616, August 21,¹⁴ Clay and Sir Sholto [Douglas] are meeting to agree on revised preamble and UK proposals respect section IV of agreement, in respect of which Clay has offered to delete reference to quadripartite action.¹⁵

Sent Department 4586. Repeated Paris for Caffery 475, USPolAd Berlin for Clay and Murphy 397, Geneva for Clayton 126.

Douglas

12. Ante, p. 1047.
13. Not printed; it asked for information regarding United States approval of the bizonal agreement on German coal management (862.6362/8–2247).
14. Ante, p. 1045.
15. Clay and Douglas reached final agreement on the Revised Level of Industry Plan in London on August 27. Regarding the release of the final text of the Plan, see the editorial note, p. 1066.