Foreign Relations of the United States, 1947, The British Commonwealth; Europe, Volume III

840.50 Recovery/7–2047: Telegram

The Ambassador in France (Caffery) to the Secretary of State

secret
urgent

Paris, July 20, 1947—6 p. m.

2886. For Secretary and Lovett. I submit following preliminary appraisal of first week’s activities of conference on European economic cooperation, based on day-by-day informal contacts which we have maintained with number of delegates from participating countries:

1. Organizational plan. There is general agreement that organizational plan provides workable basis, consisting of: (a) conference proper which is now adjourned but will probably reconvene to receive and approve final plan. (b) The committee of European economic cooperation. This is in effect conference proper but committee device is used to permit closed sessions. (Only criticism raised to date has been that Alphand, in his position as spokesman for committee, has tended to give French slant to information released. It has now been agreed that press relations will be handled by Secretariat). (c) Executive Committee. (UK, France, Netherlands, Norway and Italy) This is in effect steering committee. (d) Technical committees. Four of these (food and agriculture, energy, iron and steel and transportation) have already been established and will begin work tomorrow. It now appears that other committees may be established to deal with questions (1) labor supply and (2) housing and timber supply.

2. Plan of work. The basic document for scheme of work, which outlines objectives and types of statistical and other data required, was adopted last night and I am forwarding text by airgram. Supplementary detailed questionnaires will be prepared by technical committees for their respective fields.¹

3. The first week’s activities were characterized by desire to work as rapidly as possible and by disinclination to permit questions of procedure or minor detail to slow down progress of conference.

At same time, it is apparent that there are several fundamental policy differences which must be resolved if workable plan is to result. At some stage of negotiations views of Department may well be requested concerning these major questions. Differences which have already come into focus include:

(a) Multilateral trading. Benelux has already proposed that present network of bilateral trading and payment agreements should be placed on multilateral basis as among participating countries and I am informed that France and UK are not opposed to consideration of this proposal. Doubt has been expressed whether Scandinavian countries, in view of their commercial ties with east, will be prepared to go along on this project.

(b) The question of emphasis in planning. As I have already reported there has been good deal of discussion concerning question of whether planning should be primarily on short-term or long-term basis and cleavage is somewhat deeper than indicated by surface discussion. Benelux countries have taken approach that large part of imbalance in Europe’s payments position is due to failure to utilize productive resources already in existence and that immediate plan should concentrate on this problem. French, with some support from British, have contended that each country should submit long-term reconstruction and modernization program, arguing (a) that this is necessary in order to show American people that self-supporting European economy will finally result and (b) because assistance from US will be extended under series of bi-lateral agreements, taking into account plan of each country. I am informed that real cleavages in these differences of emphasis arise from following:

1. It is implicit in Benelux approach that resources of western zones of Germany would be utilized at rapid rate and,

2. The smaller countries fear that long-term investment program, if adopted by September 1, would merely be composite of reconstruction programs already formulated by individual countries. In such case it is feared that countries, such as France, which already have adopted “very ambitious programs” would get “lion’s share” of assistance from US. Furthermore, such composite plan would bear no necessary relationship to principle of comparative advantage.

(c) Role of western zones of Germany. As indicated above, Benelux countries believe there can be no western European economic recovery in true sense unless there is rapid utilization of resources of western Germany. They are prepared to rely on occupational controls, plus elimination of actual war industries, to deal with security problem. (I am informed that Benelux countries also believe that French zone should be merged with other two zones as part of European plan, but feel that for political reasons initiative in this matter should come from UK or US).

French, of course, have not abandoned outwardly their position of “pastoral” approach to German problem and contend that security lies in “pulling heavy industrial teeth” of Germany.

(d) Standard of living. British informed me that in anticipation of desire by some countries to use program for “spending spree” they obtained insertion of following provision in working plan:

“Standards of consumption during period under review, while they should be determined with regard to their effect on ability and incentive to produce, should not exceed those which each country expects subsequently to be able to maintain without special external assistance.”

It is believed that when combined programming is undertaken, particularly for food supplies, many questions will be raised regarding differentials in living standards both in absolute terms and relative to pre-war.

Sent Dept 2886, repeated Geneva for Clayton as 105, London as 564, Berlin as 266, to Moscow and Berlin by airpouch.

Caffery

1. The text and annex of the “Memorandum Outlining Object and Scheme of Work With a View to a Reply to Mr. Marshall” was transmitted in Paris airgram A–1212, July 21, 1947, not printed (840.50 Recovery/7–2147). The annex to this memorandum described the kinds of information to be sought by questionnaires. On August 6, the Paris Embassy in airgram A–1306 reported that the “technical questionnaires have been completed by virtually all the countries and it is hoped that they can be tabulated by the beginning of next week.” The information contained in Committee of European Economic Co-operation, vol. ii, Technical Reports, July–Sept. 1947 (Department of State publication 2952) is based on replies to these questionnaires.