840.50 Recovery/8–647: Telegram
The Ambassador in France (Caffery) to the Secretary of State
3122. For the Secretary and Lovett, from Clayton, Caffery, Douglas, Murphy and Nitze. In our discussions the past two days we have reviewed carefully the draft policy paper of the Planning Board [Staff] on the economic recovery of western Europe. We have been encouraged to find that the people in the Department and those in the field are generally thinking along similar lines.
It is our observation that many of the delegates to the Paris conference personally favor a bold constructive program; but that their governments, while agreeing in principle, shy away from many of the necessary specific measures. Furthermore, various delegates have repeatedly called to our attention the reference in the Secretary’s Harvard address to friendly aid in drafting the plan. They now feel the need of such aid, without it their planning might crystallize into an unacceptable program, which would be extremely unfortunate.
We, therefore, believe that our views covering a few basic undertakings by each country should be promptly communicated informally and in an appropriate way to the Paris conference.
We believe that the following basic undertakings are essential parts of any comprehensive economic program for Western Europe which will most nearly assure the effective employment of our assistance, promote the recovery of Western Europe within three or four years so that it may proceed thereafter without further US aid, and which the Secretary may recommend to the administration, the Congress and the American people:
- 1.
- Coal and food are key items in the recovery of Europe. Countries whose production of these commodities is subnormal should undertake to give the highest priority to maximizing the output of such commodities. Failure to achieve a satisfactory level of production will be ground for discontinuance of aid.
- 2.
- Each participating country should be obligated to take the necessary internal financial and monetary measures to stabilize its money, establish and maintain proper rates of exchange with other countries and generally to restore confidence in its currency.
- 3.
- To facilitate the production, distribution and exchange of the products of each participating country, agreement should be reached among them for effective action in the financial and commercial fields, including tangible steps for the progressive reduction and eventual [Page 344] elimination among the participating countries of exchange controls, tariffs and other trade barriers.
- 4.
- Failure by any country to take and maintain effective measures in any of the above respects will be ground for reconsideration of the aid to be extended to such country.
We have discussed the question of the form which our agreement with the participating countries should take. We believe that it will be necessary for us to make bilateral agreements but that such agreements should be clearly tied into a multilateral agreement, thus assuring individual and collective responsibility.
We have discussed in connection with paragraph number two above the proper use to which the local currency counterpart of our aid should be put. We have reached no definite conclusion. This is a technical subject which should have the attention of the National Advisory Council.1 We do feel, however, that the permanency of the financial reforms which we seek may be jeopardized if the local currency counterparts of our aid were to be used to defray public expenditures.
Sent to Department as 3122 repeated Eome for Dunn only as 198. [Clayton, Caffery, Douglas, Murphy, and Nitze.]
- The National Advisory Council on International Monetary and Financial Problems was established by the Bretton Woods Agreements Act, approved July 31, 1945; 59 Stat. 512.↩