Lot 122, Box 19B
The CEEC Washington Delegation to the Department of State 1
Aide-Mémoire
The Members of the Committee of European Economic Co-operation at present in Washington have, during recent weeks, had important and useful conversations with the Representatives of the U.S. Administration on the problems of aid for Europe.
The European Group is grateful to the U.S. Government for the conditions in which these conversations are being held. In particular they consider that a large number of technical questions which, for lack of time, could not be fully covered in the report of the 16 participating countries have been clarified. The replies to the supplementary questionnaires which have been sent to the respective capitals of the countries concerned will have been of help to the Administration in formulating their views about the character of the programme of co-operation drawn up in Paris, and on the scale of external assistance which is indispensable to ensure the success of that programme. Nevertheless, it has not been possible to give full consideration to certain essential problems although they have been touched on in the course of these exchanges of views. It is therefore necessary for us to set out frankly for the American Government these essential points since they cannot be ignored without the risk of compromising the work of European economic recovery on which all our Governments have set their minds.
These particular points to which we believe we should draw the attention of the State Department concern the amount and period of [Page 453] the aid envisaged, its form, its conditions, and, finally, the organisation which should be set up for its administration. The indications in this note are set forth simply as an interpretation of the report prepared in Paris in the belief that they reflect the spirit in which this was drawn up.
I. Amount of Proposed Aid
The European Group points out that the figure for the dollar deficit in the balance of payments of the 16 participating countries during the next four years as shown by the Paris Report constitutes an order of magnitude below which the amount of aid should not be reduced without the risk of jeopardising the achievement of the programme which the participating countries have in view. It is certainly not possible to calculate exactly the amount of this deficit which depends on the size of the harvests and therefore on climate, on the movement of prices, on the development of our dollar earnings, on the resumption of trade between Western and Eastern Europe, etc.; but the uncertainty of the factors affecting the figure contained in the Paris Report may lead to revisions upwards as well as downwards. Indeed, some of the favourable assumptions on which the calculation is based may eventually prove to be unfounded and there should therefore be an adequate measure of flexibility in the recommendations which are presented in this respect. The consequences of insufficient availability of certain commodities necessary for the rehabilitation of the European economy must also be emphasised. This factor, far from reducing the global amount of aid necessary, would tend to increase it. The restoration of equilibrium in the balance of payments might, in this case, require a longer period than that envisaged in the Paris Report.
Further, the European group has drawn the attention of the Administration to the particular importance of the year 1948. If certain countries, in the course of this first year, can obtain the resources necessary not only to cover their essential dollar imports but also to ensure their internal economic and financial stabilisation, our task over the coming years will be greatly facilitated. Thanks to the stabilisation policy which it is in any case intended to pursue, resources both material and monetary which are now hoarded will be put into circulation to hasten the recovery of the countries concerned.
II. Form of Proposed Aid
American aid can be furnished either wholly in dollars or wholly in goods, or partly in dollars and partly in goods. The European countries hope that the greatest possible part of the external aid will be supplied in dollars. In carrying out our programme of imports we are anxious that so far as possible the ordinary channels of trade should [Page 454] be used. This condition will be more difficult to fulfil if help is furnished in commodities rather than in dollars. In addition the possibility of receiving dollars rather than goods will permit each of the purchasing countries to procure the types and qualities of goods which are best suited to their needs. Experience during the course of the war has shown the importance of this consideration.
There is no doubt that these dollars will for the most part be used directly in the U.S. themselves which are the principal suppliers of raw materials, foodstuffs and the necessary equipment. Nevertheless, all these commodities which are required will not be able to be obtained on the American market. The European nations will have to place contracts outside the U.S. with producers who will demand payments in dollars. The participating countries will in consequence have to rely on dollars to enable them to pay for these supplies which are indispensable to the execution of the European programme.
We recognise that all necessary steps will have to be taken to limit the inflationary pressure which might result from these dollar purchases. We are ready to examine with the American Government how best we may co-operate in this regard with the American Administration in the common interest.
III. Conditions of Proposed Aid
We have had no clear indication from the American Administration of the possible conditions of the aid that may be granted. The estimated requirements are so considerable that if the aid that is furnished should lead to Europe having to make large transfers, the participating countries would not be in a position at the end of the period in view to ensure a stable equilibrium in their balance of payments.
At the same time, the charges to be paid to service an external debt that is too heavy would make it more difficult to obtain the credits from the International Bank or private banks which will certainly be necessary to pay for long term capital equipment.
The sums in national currency resulting from the sale in the internal market of the products imported in pursuit of the European recovery programme will not in any case, in accordance with the terms of the Paris Report, be used to cover current budget deficits.
The conditions under which these funds may be used will vary from country to country. Consequently the arrangements which will have to be made governing the use of these funds will be different for each country and will lead to individual discussions.
Nevertheless we consider it important to note that these funds should be the property of the recipient European country. This is implied in the way in which the report of the 16 participating countries was drafted.
[Page 455]The question of how these sums should be handled poses a delicate political problem. All those who during recent months have continually opposed the so-called “Marshall Plan” and have announced their intention of using all means to block it, will seek to show that the existence of these funds is capable of conferring upon the U.S. considerable powers infringing the independence of the European countries concerned. Thus these Governments should have these funds in local currency at their disposal and employ them in accordance with whatever arrangements may be concluded. The method which we suggest, while it leaves the ownership of these funds in the hands of the European country produces the desired results: as a result of the conditions which will govern the use of these funds, they will in fact be used to promote the execution of the general European recovery programme and to lighten the task of the United States.
IV. Administration of the Proposed Aid
The European Group points out that in the Paris Report the participating Governments declared their readiness, if the aid necessary for the application of the programme is given them, to set up a joint organisation with two functions:—
*On the one hand to examine and report on the extent to which the programme is being realised,
On the other hand to ensure by joint action, the realisation of the economic conditions necessary to enable the general objectives to which each country has pledged itself to be effectively achieved.
As has been stated, we are ready when the time comes to elaborate the task which would be entrusted to this organisation. It is, however, evident that such an elaboration will depend on the character of the external aid and of the organisations which on its side the American Government deems it useful to set up to ensure the execution of the programme.
In the Paris Report the sixteen participating countries declared their readiness to give, within the framework of the overall programme which they had in mind, a certain number of pledges concerning particularly their production targets, their foreign trade, European cooperation etc. In envisaging these pledges they took into account similar pledges to be given by each of the participating countries. If, however, the scale and the form and the general conditions of the external aid should be substantially different from those we have envisaged it is probable that the participating nations, however willing they might be, would not be able to sustain the pledges embodied in the [Page 456] Report. In particular, the carrying out of these pledges requires that the participating countries should be able to obtain not only in the United States but also in the whole American Continent the raw materials, foodstuffs and equipment which are indispensable.
That is why the Group of the Committee of European Economic Cooperation wished to remit to the State Department this aide-mémoire, since it is conscious of the seriousness of the repercussions on the overall plan which would flow from recommendations which did not give sufficient consideration to the essential interests which we have the honour to set out in this paper.
- This was circulated as ASC Document 16, November 3, 1947. A copy in French bearing the penned notation CEEC/W/44, dated October 28, is in file FW840.50 Recovery/10–2477.↩
- The English text of this paragraph differs from the French version which could not be changed in time. It is agreed by the C.E.E.C. Group that the English text is the correct one. [Footnote in source text.]↩