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

840.50 Recovery/ 8–1447: Telegram

The Acting Secretary of State to the Embassy in France

secret
urgent

Washington, August 14, 1947—4 p. m.

3029. For Clayton and Caffery. I. From your cables and other reports that reach us of the course of the Paris talks, we gain the impression that too little attention is being paid by the participants to the elements of self-help and mutual aid which constituted an integral part of the suggestions made by the Secretary in his Harvard speech. We are much concerned over this. We consider that the problem of the leading western European countries is not only to make up deficiencies caused by the vicissitudes of the war, but to adjust themselves to certain basic changes which have occurred and are continuing to occur in their international position. This adjustment calls for courageous and incisive action on their own part, both individually and collectively. Unless they are prepared to make this adjustment, no aid from this country could be really effective. It could achieve no more than a postponement of inevitable decisions. We are entirely serious about this and we will not be able to accept, even as a basis for recommendation to Congress, any plan which does not recognize this basic requirement. An itemized bill summing up prospective deficits against a background of present policies and arrangements will definitely not be sufficient.

In approaching this problem, the Europeans might make more progress if they were to assume there was no one to help them, to imagine that they had no choice but to try to work out an acceptable economic future without any outside support, to elaborate the best program they could, and only then to undertake to define the gaps which absolutely could not be filled out of their own resources even by the most strenuous individual and collective effort.

The above remains our basic position on these matters and you are at liberty to make it clear to any of the participants at the Paris talks.¹

II. With respect to the specific points in your 3122 Aug 6, the following are our comments:

1. It is assumed that point one, although intended to emphasize coal and food, was not meant to exclude production increases through bold constructive action in other bottleneck industries, and in industries on which these in turn depend (i.e., fertilizer, mining machinery, etc.). Increases in production, moreover, should be accompanied by constructive action in distribution, particularly in food collection from farmers, and measures to deal with diversions of mining and factory products into black and compensation markets, etc. There should also be considered necessity for expansion of capital equipment in some lines, so as to reach for each country pay-as-you-go basis within brief period of time at satisfactory standards of living, but primary emphasis should be on efficient utilization of existing capacity rather than on capital development.

2. Re your point two, we regard financial and monetary stability as a goal toward which European efforts should be steadfastly directed, and we consider it important that every effort be made by the conference powers toward attainment of that goal. However, in view of fact that some financial and monetary disorders are basically symptoms of production difficulties and that some others reflect deep-seated differences between political groups which cannot be bridged immediately, we question advisability of making the adoption and carrying out of policies of, say, wage reduction or tax reforms the sine qua non of US aid. The importance of formulating and adopting as soon as practicable (keeping in mind the above considerations and without jeopardizing the program) measures to achieve the ends mentioned in your para 2 should be stressed.

3 (a) Your point three is regarded here as two separate though related points. First is necessity to which US attaches greatest importance for full collaborative effort of European countries to solve their production problems in concert. This involves agreement on rates of reactivation among the participating countries, sharing of commodities in short supply on equitable basis, special efforts in one country to direct production into fields helpful to others, etc.

(b) Tangible steps for progressive reduction and eventual elimination among participating countries of exchange controls, tariffs and other trade barriers in our judgment constitute a separate point.

4. We question the advisability at this time of overemphasizing that failure to achieve set levels of production or to maintain effective measures in the above respects will be ground for the discontinuance or reconsideration of aid. Production goals may not be met for variety of reasons, including Acts of God (flood, freeze, drought), Communist-inspired strikes, inept administration, or perverse unwillingness to live up to commitments. Withdrawal of aid would have to be weighed against reasons underlying failure, and against political as well as economic consequences. Suggest it is more appropriate to withhold discussion of specific conditions under which US would withdraw aid from individual countries until bilateral and multilateral agreements are negotiated after Congressional action on aid to Europe. At this time, main emphasis should be laid on unwillingness of US public and US Congress to aid Europe as a whole unless European countries take effective and cooperative steps to help themselves. Most effective present sanction lies, in our judgment, in likelihood of US refusal to support European plan unless there is real unified effort on their part in the sense of points covered in this message.

III. For your guidance in answering queries from participants in the Conference, the following are some of the basic objectives which we feel should be envisaged by any European program if it is to have a reasonable chance of winning support from the American public and Congress:

1. The program must be designed to bring about the greatest practicable increase, within the European countries concerned, in production of food and materials needed to fill their basic requirements and to limit requests for supplies from the US to those necessary to fill deficits which those countries cannot, with vigorous effort, themselves satisfy.

2. Further, the production program of a participating country should not be based only on its own needs but also on the contribution that can be made to filling the needs of all participating countries.

3. The participating countries should adopt financial and monetary programs designed to correct as soon as practicable existing financial and monetary weaknesses and to accomplish stabilization of currencies, establishment and maintenance of proper rates of exchange and generally to restore confidence in currencies.

4. The participating countries should adopt measures looking to the most effective distribution and use of their own resources and the resources obtained from outside sources, including measures to ensure farm collections and to prevent diversions of products into black markets.

5. The participating countries should take steps to facilitate the greatest practicable interchange of goods and services among themselves, reducing and seeking to eliminate dependence on exchange controls, quota restrictions, compensation and barter agreements and other obstacles to a free flow of goods.

6. The program should provide for the greatest possible European self-help, should provide for action on the part of the participating countries which they will in fact be able to carry out, and should be such as to assure the maintenance of the European economy without continued support from the US.

The above points may be mentioned in response to inquiries in the spirit of friendly aid to the conference and as an indication of thinking in this Dept as to the type of action necessary to achieve European economic recovery. It should be clearly understood that, even if the participating countries adopt all the measures outlined above our action in giving friendly aid in drafting must not be construed as a commitment on the part of the US to accept or implement any plan. Furthermore, to avoid any possibility of misunderstanding we should caution inquirers that, even if the conference adopts a program which seems workable on its face, any aid which the US might determine to give must be conditioned upon the effective carrying out of such program.

IV. In addition to stating the objectives outlined in para III Dept believes that we could offer to furnish on request technical factual information such as statistical information, advice as to the physical possibility of producing certain goods in the US, etc. Further, the US could offer that, when the conference has produced a first draft of a program, responsive to the self-help and mutual help approach outlined earlier herein, US representatives could go over it informally with representatives of the conference, seeking explanations and clarifications of points that are not clear and generally assisting in putting the program into form most understandable to those in the US who would study it for substance. It should be clearly understood that such drafting assistance was not to be construed as approval or endorsement of the program but was merely to facilitate its presentation to the US Govt, including the Congress.

V. It is recognized that the carrying out of the functions described in para IV will require additional US personnel in Paris to assist Embassy and Clayton when in Paris. Also, it would seem helpful to have qualified staff in Paris who could return to Washington when program is completed, having studied it in process of development. This would mean that less time would be required for evaluating the program after it has been presented and, therefore, enabling earlier presentation to Congress. In addition, the staff could advise you if the program being developed was inadequate, in which case we would be able to consider whether further positive action by the US was appropriate. If inadequate, Dept believes it might be possible to authorize you to make substantive comments on specific parts of the program and on its omissions. Dept believes such staff should be attached to Embassy and not have liaison with conference independent of Embassy.

VI. If Clayton and Ambassador agree with suggestions herein, suggest informal talks with appropriate committee chairmen or others be held promptly. It may be considered desirable within the next few days for Dept to release to the press here a statement along the lines of paras III and IV above. Your comments requested.

VII. Dept believes further aid can be given re role of western Germany. Proposals will be discussed with War and then Brit and will be sent later.

Sent Paris, repeated to London for Ambassador as 3495.

Lovett

1. When French Ambassador Bonnet called on Acting Secretary Lovett on August 21 prior to a return to Paris for consultation, Lovett “stated that time was running short and that he was disturbed lest the conference of the 16 nations in Paris should produce little more than 16 ‘shopping lists’ for which the United States would be expected to pay the bill.” He then read the above portion of this telegram to M. Bonnet and “urged the Ambassador to impress on his government the necessity for bringing home to the governments of the smaller countries at Paris this basic conception of ours.” (840.50 Recovery/8–2147)