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

840.50 Recovery/9–747: Circular Telegram

The Acting Secretary of State to Diplomatic Representatives Accredited to Countries Participating in the Conference of European Economic Cooperation and to the United States Political Adviser for Germany (Murphy)¹

top secret
us urgent

Washington, September 7, 1947—1 a. m.

To certain American diplomatic officers. 1. You are requested soonest and not later than Tuesday to present orally to FonMin or at your discretion to FonMin and Prime Minister substance of following:

2. Admittedly incomplete info received by US Govt as to present content proposed report by Conference on European Economic Cooperation, which they now expect to complete about 15 Sept, is that it has numerous deficiencies which if publicized as final report by Europeans in response SecState’s Harvard speech would make it unacceptable to State Dept, would undoubtedly evoke strong criticism in US and consequently endanger US support of any more reasonable or more realistic European aid program.

3. Indications are that CEEC report may state requirements greatly exceeding potential aid available and that whole program shows little more than lip service to principles of European self help and mutual help.

4. US recognizes political difficulties of participating Govts in conforming national programs and objectives to a cooperative program and subordinating separate national aims where necessary. US believes, however, that recognition this principle essential to US acceptance of program and that political consequences of rejection by US of any aid program immeasurably worse. It was US hope that concept and practice of cooperation would arouse response in European countries as positive approach toward defeating difficulties against which participating countries have been trying to defend selves. As to food, US recognizes political difficulty of Govt’s planning for less than satisfactory feeding, and that trimming of program to fit realities of supply situation will come after program submitted and checked against supplies available and possible. Reducing this trimming to minimum, however, should be one objective of drafting program.

5. Under Sec. Clayton is being asked by Dept to take up at once with Exec. Comm., CEEC, a suggested course of action and time schedule aimed at deferring completion present CEEC report by ten days to permit participating Govts to instruct delegates their views as to recasting of report to have it concentrate emphasis on principles, clearly indicate that report is not final but represents completion initial steps of preparing document useful as basis of further discussion, and that initial technical reports require further work by technical committees to correct original deficiencies. (Note: Cable to Clayton being repeated to you for info and background. Please avoid implying interim aid or special session.)²

6. US reps at Paris have already communicated to Exec. Comm. of CEEC main essentials which are believed necessary to make program workable and to enhance probability of acceptance. Technical experts of participating countries at Paris possibly may not have communicated these fully to their Govts, and instructions of participating Govts to their reps at Paris may not permit appropriate weight being given these essential aspects in Paris. Hence, US Govt is communicating them directly to participating Govts.

7. Main essentials follow:

a. The achievement within the four-year period of a workable European economy independent of special, outside aid.

b. Continuous and progressive reduction in the special outside aid required by the participating countries to the point where it will become eliminated by the end of the period.

c. The participating countries must from time to time during the period of the program show convincing evidence that they have made substantial progress toward the scheduled goals of production of items essential to European recovery, especially food and coal.

d. Long-run development projects should not be allowed to interfere with the reactivation of the most efficient existing productive facilities. The latter must have first priority. The financing of long-term projects must be obtained from sources outside this program.

e. The participating countries to undertake the necessary internal financial and monetary measures to stabilize their currencies, establish and maintain proper rates of exchange, and generally restore confidence in their monetary systems.

f. The participating countries to take concerted steps to facilitate the greatest practicable interchange of goods and services among themselves, adopting definite measures directed toward the progressive reduction and eventual elimination of barriers to trade within the area, in accordance with the principles of the ITO Charter.

g. The participating countries must regard the conditions mentioned above as a common European responsibility and, therefore, should envisage use of some continuing multilateral organization which from time to time will review and take stock of the progress achieved by participating Govts under the program.

8. In communicating these views, US reps made clear that they were not attempting to dictate, and that no commitment by US was involved.

9. US believes that genuine acceptance and vigorous application of foregoing principles and maximization of inter-European cooperation in restoration of production and economic patterns of trade and finance will make possible dynamic program in which Europe, with minimum external aid, can start on path toward healthy economic recovery. When this recovery begins, resources, now latent or hoarded, should emerge and become part of productive effort and further reduce necessity for external assistance.

10. US recognizes that problem of workable European economy independent of special outside aid at end of four years divides into problems of 1) Europe’s ability to produce goods and services; 2) Europe’s ability to market such goods. While existence of latter problem is recognized, its immediacy is far less than former. First problem and immediate concern of US is production.

11. From point of view of public reaction both in Europe and US, our view is that report should put primary emphasis on positive steps being taken by Europe; the manner in which commodity aid from US can assist positive steps rather than plea for continuing flow of US dollars.

12. In closing presentations to FonMins, points should be made that 1) CEEC to date has perhaps been too much on technical level with delegates unable to cut through instructions so as to concert on and actually apply principles of maximum production and cooperative self-help; 2) opponents of program in US will magnify any indication aid is being requested from US to take up slackness by Europeans; 3) basic chance for success of European recovery program depends on popular European desire to make it work, to which end national approach solely through little understood technical planning will not suffice.³

13. For your info, we are now trying to get British concurrence to our proposal to make joint announcement that we will discuss at once bizonal German plans in CEEC with view to integrating into area recovery program. Will advise as soon as cleared. If you receive word before seeing FonMin, it should be incorporated in your oral statement, but you should not delay presentation to await such word as it can be made subject of separate approach.

Lovett

1. The telegram which went to Paris was addressed to both Ambassador Caffery and Under Secretary of State Clayton.
2. Circular telegram of September 7, 1947—2 a. m., infra.
3. Replies from the American missions indicated that these views received sympathetic consideration by the various foreign ministers. The replies are in file 840.50 Recovery.