840.50 Recovery/8–2447: Telegram
The Acting Secretary of State to the Secretary of State at Petropolis, Brazil1
us urgent
niact
80. Humelsine for Carter.2 Eyes Only for Secretary Marshall from Lovett. Subject: Paris talks on unified economic plan. 1. Seven days from now the Paris Conference is scheduled to produce a plan. Progress so far is disappointing in that all that has come out so far is sixteen shopping lists which may be dressed up by some large-scale [Page 373] but very long-term projects such as Alpine power, etc. The present grand total of the shopping list approach is unreasonable, not solely because of its size but because on its face it indicates that even these huge sums will not accomplish the rehabilitation over a four-year period, still leaving a deficit at end of that time amounting to about four billion dollars annually (mostly a food deficit according to their experts).
2. This approach continued even after a message sent on August 14 to Clayton and Caffery3 pointing out that from reports received “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.”
3. The remainder of the cable was devoted to pointing out that our objective was to break the bottlenecks so as to increase production, both industrial and agricultural, through the clearing of choke points in coal, fertilizer, transportation, food, etc., and in improving systems of distribution. We pointed out necessity for primary emphasis on efficient utilization of existing capacity rather than on capital development. We then enumerated financial and monetary stability, tangible [Page 374] and progressive reduction of exchange controls, tariffs, etc., and necessity for removal of all obstacles in exchange of goods between European nations, etc. Clayton and Caffery have obviously endeavored to make these points clear but, as indicated at outset this message, adequate results have not ensued.
5. This morning New York Times front page article by Callender from Paris apparently giving considerable detail on European economic conference report. Article stresses that there will remain after 1951 annual deficit of four billion dollars due principally to food import requirements. Unless Western Europe’s food supply can be made up from resumption trade relations with food producing countries behind Iron Curtain alternative is continuing provision these food requirements from Western Hemisphere, et cetera, which will continue the large annual dollar deficit. Article also stresses importance of Germany requirements for increased supplies of coke and finished steel. Article ends on disturbing note implying that report is in effect near [mere?] summation of national requirements based on individual national planning. Article ends with paragraph stating members of conference count on US officials to aid them in writing final report which would “strike the imagination” of US public and Congress. I believe the article was planted.
In these circumstances and against the background of our promise to lend friendly aid in drafting, I am convinced that the time has now arrived for us to give some indications that the present plan is not acceptable and to do so promptly. This can be done without commitments. If not done we will be criticized. I therefore recommend the following steps:
- (a)
- That a message be dispatched to Clayton and Caffery reiterating our object to obtain from the Europeans a plan which will enable them to improve production to the point where they can become self-supporting at whatever minimum scale is tolerable through the principle of self-help and mutual help rather than have them lean on us to rebuild, on a long-term capital basis, their entire production machine. The latter, while desirable, cannot come into being for some years and we cannot support the drain of rebuilding Europe on a grand scale. In connection with this basic approach, we would emphasize the breaking of specific bottlenecks well known to them and to us. This overall tentative statement of Department’s views will be held pending your comments on proposals submitted herewith.
- (b)
- Since Clayton and Caffery have been out of touch with headquarters for some months and may not be wholly familiar with the work that has been done here and the difficulties any program must face, I would like to send George Kennan for a few days and Charles Bonesteel for a week to Paris Tuesday night carrying realistic proposals to Clayton and Caffery so that they can be of such assistance [Page 375] as possible in giving aid to Caffery and Clayton for the Executive Committee in particular.
- (c)
- As is common in all such conferences, I suspect that no real progress will be made in obtaining real concessions involving the abandonment of national prestige or transitory competitive advantages until the deadline for adjournment approaches. Therefore it seems wise to me to keep this pressure on the conferees but to notify Franks, the British Chairman of the Executive or Steering Committee, through Caffery, that we would be prepared to have the conference extended for two weeks in order to avoid having them bring out a shopping list report instead of a constructive program. I believe this can be done and that it would be welcome. It would not materially delay our over-all study of the program since Harriman’s committee will not report on U.S. potentialities for aid until October first.
- (d)
- We are preparing a summarized memorandum using portion of Kennan’s report as background and adding some material developed in economic sections as a top secret report to keep the Secretaries of Treasury, War and Commerce posted on current developments in light of British crisis. They have been asking for detailed indications from Paris talks and we are anxious to inform them and insure their cooperation in our efforts to find solution. We would like to have this go only to the three Departments mentioned above plus the President, and think we can have it ready by Thursday.
6. While the present outlook seems gloomy, I am not one bit discouraged, as we are only now coming up to the point where we have something concrete to work on and where we can point out the unsatisfactory measures so far taken. If we can keep the conferees from getting crystallized into a bad plan, perhaps we can swing them into a good one, or at least a better one. This seems to us here to be well worth our best efforts. The British financial crisis, plus the virtual British walkout on the ITO at Geneva,4 were not foreseen by the conferees when their original time schedule was selected, and two weeks grace after September 1 may be the difference between failure and success.
Will you please authorize or amend the action outlined above at your earliest convenience.
All goes well here.
Best regards,5
- Secretary Marshall was head of the United States delegation at the Inter-American Conference for the Maintenance of Continental Peace and Security at Quitandinha, near Petropolis, Brazil. For documentation on this conference, see vol. viii, pp. 1 ff.↩
- Carlisle H. Humelsine became Director of the Executive Secretariat, Office of the Secretary of State on June 29, 1947; Marshall S. Carter was Special Assistant to the Secretary of State.↩
- Telegram 3029, p. 356.↩
- For documentation regarding the U.S. role at the Geneva conference, the Second Session of the Preparatory Committee of the United Nations Conference on Trade and Employment, see volume i .↩
- In top secret telegram 08 from Petropolis, Secretary Marshall answered: “I concur completely in your views and action proposed in your 80. I consider it essential that our people show great firmness and be most emphatic in stating our requirements. I suggest that proposed message to Caffery and Clayton be repeated to Douglas and Dunn for their supporting advice to respective government seats. We should also furnish Forrestal a copy of the summarized memorandum of developments you are preparing.” (840.50 Recovery/8–2547)↩