840.50 Recovery/8–2547: Telegram
The Consul at Geneva (Troutman) to the Secretary of State
us urgent
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909. Lovett from Clayton. Reagan,1 White and I spent over two hours with Sir Oliver Franks Saturday discussing very disturbing total requirements 16 nations and western Germany. Sir Oliver emphasized that this summation is not yet a conference document as there is still much work to do on it.
Total balance of payments deficit with USA for four year period ’48 to ’51 is 19.9 billion dollars and with rest of American continent 8.3 billion. Grand total American continent 28.2 billions ranging from 8.1 in ’48 gradually downwards to 5.8 in ’51. Latter figure most disturbing of all because indicates their expectation that they will be far from self sustaining in ’51. Also indicated that the agreed basis for preparation of figures was not observed. That basis is a standard of living which they expect to be able to maintain without special outside assistance after ’51.
Figures of requirements are divided between food, steel, transport and fuel in one total and other goods in another total. Latter is stated at 3 billion for each of the four years former 6.7 for ’48, 6.6 for ’49, 6.3 for ’50, 6.1 for ’51. This also disturbing as showing unsatisfactory progress in recovery production particularly food and coal. Exports to American continent are to be deducted.
Figures for rest of world are almost in balance showing a total deficit of 1 billion for the four years.
Of course I told Sir Oliver in my opinion the 28.2 figure was out of the question.
I again stated to Sir Oliver that I believed presentation of figures for ’48 at higher level than these 16 countries and western Germany showed as deficit with American continent in ’46 would create very bad impression at home and of course subsequent years should show scaling down to very low figures for ’51. None of us knows exactly [Page 378] what this ’46 deficit was but my impression is it was between 5 and 6 billion dollars. Sir Oliver stated that this would mean a standard of living below prewar and would raise grave political problems for most of the countries. I replied that the destruction to European economy by two world wars was so enormous that I seriously questioned if Europe could achieve in the next decade a standard of living equal to prewar even with all the help which had been provided by the US and with such additional help from the US as might be practicable. This especially true because for several prewar years Europe was living off its investments abroad to extent 2 billions annually, three-fourths being interest and one-fourth disinvestment and that practically all this capital now lost.
Sir Oliver said a quick examination of the supporting documents indicated that the total could be trimmed by probably 5 billion dollars because some of the requirements included capital equipment which should be financed by the International Bank; in other cases requirements clearly exceeded available supplies; furthermore indicated exports by and to the group substantially exceeded indicated imports from the same source hence there would probably be further exports available for American continent from this source.
Sir Oliver added if the total had to be reduced, say to 15 billion, he was sure this could only be done if we told them it had to be done.
I informed Sir Oliver of the concern expressed by you in 10432 to Geneva and inquired particularly regarding end use examination of requirements and whether the reports submitted by individual countries had been subjected to critical analysis.
Sir Oliver said that the work represented primarily an assembly of individual country estimates although some “shaking down” had been accomplished in cases where combined estimates were obviously greatly in excess of available supplies. As to end use examination this was impossible within the available time. He said it would take months.
Sir Oliver left me with the definite impression that he was very reluctant to open up in the conference the question of relative living standards current or prospective and that under its present system of procedures the conference was not likely to arrive at a program which would bring their actual dollar requirements much below the preliminary summation or which would give any assurance of a self sustaining economy by ’52.
I think the trouble is that most of these countries have really not come to grips with their toughest problems. For example, Britain has not come to grips with the coal problem. I think we ought to tell [Page 379] this conference and Britain and France that their plan must contemplate that Britain will again export annually 25 to 30 million tons of coal (exclusive of bunkers) by ’51 and that France will again be practically self sustaining in bread grains by that time. If we don’t tell them this, they won’t do it. The French need agricultural workers and still they are sticky on receiving them from Italy where there is a great excess of such workers anxious to emigrate. France and Britain will not face the political hurdles they must take if they are to solve their coal and grain problems unless we make it clear that we will not consider assistance on any other basis. I am sure both problems can be satisfactorily solved but not if they think we will continue to furnish coal and grain in current volume. These are just examples of the situation we face.
I am convinced there is no other way to deal with this situation than to impose certain necessary conditions. If we fail to do so, we are going to be presented with a bill which I do not believe our people should or will meet. It will be much more difficult to take corrective measures then than now. I am repeating this to London and Paris for Ambassadors only with request that they wire you direct their comments.
My next meeting with Sir Oliver and perhaps his Executive Committee set for Paris Thursday morning. I am asking Ambassador Douglas come over if convenient and of course Ambassador Caffery will be present. Will appreciate receiving your instructions by that time.
Sent Dept 909, repeated London Ambassador’s eyes only 89, Paris Ambassador’s eyes only 82. [Clayton.]