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

FW 840.50 Recovery/11–347

Record of a Meeting Between Members of the Advisory Steering Committee and the CEEC Delegation¹

confidential

Washington, November 4, 1947.

Present

	ceec group
Delegates:	Sir Olivier Franks (U.K.)
	Messrs.	Hervé Alphand (France)
		F. H. Boland (Ireland)
		Campilli (Italy)
		Ole Colbjornsen (Norway)
		H. M. Hirschfeld (Netherlands)
		Verdelis (Greece)
Other:	Messrs.	Marris (U.K.)
		Marjolin (France)
		Serreulles (France)
		Colonna (Italy)
		Van der Beugel (Netherlands)
		u.s. group
	Messrs.	Averell Harriman, Secretary of Commerce
		Robert A. Lovett, Under Secretary of State
		William H. Draper, Under Secretary of the Army
		Willard L. Thorp, Assistant Secretary of State
		M. S. Szymczak, Governor of Bd. of Governors of Federal Reserve System
		Charles E. Bohlen, Counselor of Dept. of State
		C. H. Bonesteel, Dept. of State
		Lincoln Gordon, Dept. of State
		Melvin L. Manfull, Dept. of State
		Roger Tubby, Dept. of State
		T. C. Blaisdell Jr., Dept. of Commerce
		Philip M. Kaiser, Dept. of Labor
		Frank A. Southard, Dept. of Treasury
		Dan Wheeler, Dept. of Interior
		J. Burke Knapp, Federal Reserve Board
	Colonel R. M. Cheseldine, Dept. of the Army
	Lt. Col. Philip Shepley, Dept. of the Army

1. In opening of the meeting, Mr. Lovett stated that, while the United States Executive Branch had now reached the point where the factual basis and the general pattern of the program is quite clear, agreement must be reached on certain basic policy decisions. The majority of these policy questions either cannot be decided on the basis of present information or the alternate courses of action which exist will require extremely delicate evaluation before decisions are made.

Specific Points Not Previously Raised by the CEEC Delegation

2. Sir Oliver Franks stated that, since the CEEC Delegation will be returning to Europe shortly, the members desired to obtain preliminary views of the general policy lines which the U.S. Administration is likely to follow in order that: (a) the CEEC can determine how these views will affect the recovery program as conceived by the CEEC at Paris; and (b) these views can be taken into account in future work in CEEC and in the individual participating countries. He stated that in addition to the basic points raised in the two aides-mémoire transmitted to the State Department by the CEEC Delegation, the CEEC would like an indication of prospective U.S. action with respect to the key items of fertilizers (particularly nitrogen fertilizers) and semi-finished steel, which are of critical importance to the recovery program. He observed that fertilizers in sufficient quantities are essential since they directly affect the rate of recovery in the agricultural production program. Semi-finished steel is essential across the board but affects primarily the programs contemplated by France, the United Kingdom and Italy, in that order. The CEEC is aware that this request might be considered premature in view of imminent publication of the Harriman Committee report. Mr. Lovett replied that general comment on items in short supply would be premature at this time, since the report of the Harriman Committee will prescribe the general limits of availabilities. He inquired whether Secretary Harriman desired to comment on this point.

3. Mr. Harriman observed that he occupied a dual position with respect to the recovery program—that of a Cabinet Officer directly concerned with the program and at the same time Chairman of the Harriman Committee of the distinguished citizens appointed by the President to develop recommendations on certain aspects of the program. He requested that the CEEC Delegation keep in mind that the report of the Harriman Committee did not necessarily represent his official views as Secretary of Commerce on the subjects covered therein. With respect to the questions raised by Sir Oliver Franks, he pointed out that a determination cannot be made within the next few weeks since such a determination will be based on a screening process to determine the relative importance of short-supply items to the U.S. economy as compared with CEEC requirements. In respect to steel, for example, it is a matter of degree, since if too much steel is allocated to meet CEEC requirements it might limit the capacity of the United States to produce.

4. Mr. Harriman stated that there was perhaps an aspect of the Harriman Committee report which warranted informal communication to the CEEC Delegation. This aspect relates to food requirements and the food production program. It is the general view of the United States technical experts on the Harriman Committee that the CEEC countries will not obtain the estimated food requirements because of world-wide short supply. Furthermore, it is their feeling that the CEEC has not explored fully the potential sources of supply outside the U.S. within the control of certain CEEC countries; i.e., their colonies and dependent areas. Mr. Harriman recommended that the CEEC give consideration to this aspect of the Harriman Committee report since the United States experts on that committee believe that as long as the CEEC countries place abnormal reliance on the United States for fulfillment of food requirements recurrent food crises will probably develop.

Points Raised in Previous CEEC “Aide-Mémoire”

5. Mr. Lovett stated that it might be helpful if he were to indicate the present lines of the thinking in the Department on the points raised in the previous CEEC aide-mémoire. For this purpose he had prepared an informal aide-mémoire which he would read and make available to the CEEC Delegation. (At this point Mr. Lovett read the informal U.S. aide-mémoire of November 3—see copy attached.²) In addition the following specific questions merit further comment:

a. Aid from Latin America and Canada: Mr. Lovett observed that the United States Government had considered suggesting to the CEEC Delegation that the most appropriate way for the CEEC countries to obtain aid from Latin America would be for them to address an aid request directly to the Pan American Union and that simultaneous action should be taken with respect to Canada. Sir Oliver stated that, while the CEEC did not desire to comment on the approach to the Pan American Union or Canada at the present time since the CEEC and the governments of the individual CEEC countries would desire to consider the proposal further, the CEEC Delegation would appreciate information on the background developments leading to the U.S. proposal. Mr. Thorp replied that the proposal stems primarily from the importance of these countries as potential sources of supply for items in critical short supply in the U.S. It is a feeling of some U.S. experts that the resources of Canada and the Latin American countries in these key items might be somewhat larger than was originally supposed. Therefore, it seems desirable to tap these sources in order to obtain a total amount of commodities which more nearly approximates the total amount necessary for European recovery. Since development of a procedure for procurement of these items would obviously come to a negotiation point at some stage, it might be desirable to bring together representatives of the countries seeking supplies, of the U.S. as the procurement agent, and the supplying country. Efforts should be made to avoid a series of bilateral negotiations.

6. The approach through the Pan American Union was suggested merely as a means of simplifying the procedure since its sub-structure includes an Economic and Social Council consisting of representatives of all Latin American countries and the U.S. Adoption of this procedure would obviate the possible development of a series of direct bilateral approaches.

In this regard Sir Oliver Franks stated that the CEEC Delegation had some concern that if initiative for assistance from Latin America were to come from Europe it might result in the individual CEEC countries becoming involved in a series of bilateral negotiations. For example, it is conceivable that if the U.K. were not able to give Argentina the dollars required for commodities, and if Argentina would not accept sterling, the U.K. might then have to give coal to Argentina at the expense of the European recovery program. Mr. Lovett replied that the proposal did not embrace the possibilities of bilateral discussions with individual Latin American countries but merely a request for economic assistance. He observed that it would be awkward for the U.S. Government to request other American Republics to assist in aid to Europe without their first having received from the CEEC a request for such assistance.

Mr. Thorp continued that the simultaneous CEEC approach to Canada is an essential element in the proposal because of Canada’s major importance as a potential source of supply and the desirability of not creating the impression that a request for assistance from Canada under the program is in the nature of an after-thought.

7. In response to a question as to whether U.S. Government has received any views from Latin American countries on this subject, Mr. Thorp replied that informally three representatives of three Latin American countries had inquired as to developments regarding a European recovery program and the possible way in which the Latin American countries might fit into the program. He observed that he had indicated to these representatives that there was no question that Latin American countries would be brought into the picture in the very near future. He added that the Department of State had discussed the question with the U.S. representative on the Pan American Union who feels that a direct CEEC aid request to the Pan American Union would be the most appropriate approach.

b. Off-Shore Procurement: Mr. Lovett stated that current thinking in the Administration is in pursuance of the thesis that, in so far as possible, procurement and trade should follow normal channels of trade. Consequently, Congress will be requested to appropriate funds to the U.S. agency administering the program and an effort will be made to provide for wide flexibility in the allocation and administration of such funds.

He stressed the fact that such an arrangement is dependent entirely upon Congressional action. However, even assuming favorable Congressional action, it should be clear to all that the U.S. public would not permit purchase of commodities in third countries with United States funds at prices substantially higher than those prevailing in the United States. This fact will require some measure of cooperation among the CEEC, the United States, and the supplying country. Mr. Marris inquired whether this implied that all procurement in third countries would be solely through U.S. Government procurement agencies. Mr. Thorp replied in the negative, pointing out that in certain cases it might involve only the U.S. making payments on approved transactions.

c. Form of U.S. Aid: Mr. Lovett stated that the general line of thought at present is that U.S. assistance would be partly in the form of loans and partly in the form of grants-in-aid. Only with respect to grants-in-aid does the U.S. Administration see an area for further discussion on the subject of the use of local currency counterparts of U.S. aid. While a division of opinion still exists in the U.S. Executive Branch as to their use, the area of disagreement does not extend to the point where it would render the transfer problems or the capital investment problems more difficult.

Mr. Boland inquired whether he would be correct in assuming that a general formula had been developed which could be applied in determining whether a certain category of aid would be in the form of a loan or of a grant-in-aid and that specific details for individual CEEC countries would be embodied in the bilateral agreements when negotiated. Mr. Lovett replied in the affirmative.

Mr. Hirschfeld inquired whether the U.S. envisaged loans of the following types: (1) loans to finance certain types of U.S. aid which would assist in meeting current balance of payment deficits; and, (2) loans from the International Bank or other sources to help finance the purchase of capital equipment for development projects. Mr. Lovett replied in the affirmative.

d. Local Currency Counterparts of U.S. Assistance: Following an expression of gratitude as to the spirit and manner in which the U.S. has approached the problem of European recovery, Mr. Alphand stressed the importance of arriving at a mutually satisfactory arrangement for the handling of local European currency counterparts of U.S. assistance. He stated that in view of the political implications involved the CEEC realizes that no final conclusion can be reached at the present. For example, from the U.S. political viewpoint this problem must be considered in light of the requirement for maximum efficient use of U.S. aid. From the European political viewpoint it must be considered in light of the recurring reports from certain segments of the public that the European recovery program will result in U.S. infringement of the national sovereignty of the participating countries. While it is recognized that this latter line of reasoning is clearly overdrawn, it is still necessary to develop a sound and mutually agreed formula for handling local currencies.

In this connection Mr. Lovett stated that these were the very considerations that create the problem. From the U.S. viewpoint the European recovery program is in a sense a risk both from the economic and political standpoints if we keep in mind the scale of the aid envisaged and the internal political factors involved. However, U.S. public opinion in general will require that the European countries take a risk commensurate to that undertaken by the U.S. Since there is a lively recollection in certain sections of the U.S. public of unhappy past experiences in connection with the use of local currency counterparts of U.S. aid, it will be necessary under the program now envisaged to provide adequate safeguards.

Mr. Lovett expressed confidence that a mutually agreeable arrangement based on a rule of reason could be developed. He observed that various segments of the U.S. Government and the U.S. public might advance extreme suggestions for the appropriate method of dealing with this problem which may cause alarm among those persons in the CEEC countries not intimately familiar with the U.S. governmental processes. He requested that the CEEC Delegation bear in mind, and transmit to the appropriate persons in their governments, that they should take their cue on this matter from the U.S. Administration.

e. Stabilization Loans: Dr. Hirschfeld inquired whether the U.S. position with respect to loans to CEEC countries for stabilization assistance had been clarified to the point where preliminary views could be given. Mr. Lovett replied that the subject was still under consideration and no firm decision on the amount or timing for such loans had been reached to date.

Further Action Required

8. Mr. Bonesteel stated that pending clarification of Congressional action on the program a mutual problem exists of carrying on the continuing work necessary to obviate a hiatus between possible final authorization for the program and the time when the program can be placed into full operation. This continuing work might include: (a) the timing of the review process in CEEC after anticipated U.S. availabilities are known, (b) reaffirmation of mutual commitments adopted in Paris and other conditions in the negotiation of the multilateral and bilateral agreements, and (c) organization and staffing of the U.S. and continuing European organizations etc. While the U.S. will continue to communicate through the normal diplomatic channels, there appears to be need for some collective action by the CEEC countries on these matters.

9. Sir Oliver Franks stated that it would be helpful to the CEEC Delegation if some indication could be given of a timetable on which the U.S. Administration is currently operating. Mr. Bonesteel replied that definitive information could not be given at present, although it is hoped that the interim aid program would have an over-riding priority in the special session and that consideration of the full-scale program would proceed as soon as possible thereafter. Mr. Bohlen concurred, adding that because of the many variables involved no clear indication could be given until sometime after November 10. He inquired whether the CEEC Delegation was leaving a representative of its Secretariat in Washington who could serve as a contact point for providing continuing information to the CEEC countries. Sir Oliver replied in the negative but indicated that the embassies of the respective participating countries would forward to the Department of State the names of the representative[s] who will be responsible for reporting to the participating governments on these points. (See ASC D–20³)

a. Treatment of U.S. Private Interests Under the Program. Mr. Blaisdell stated that numerous inquiries have been received from private U.S. investors as to their possible treatment under the program. He inquired as to: (a) whether in drawing up the Paris Report the CEEC countries had included for balance of payments purposes the U.S. development projects financed wholly or partly by U.S. private capital; and, (b) what approach would be used in this regard in the coming years under the program. He pointed out that it was essential to have an agreed U.S.–CEEC view on this subject. Sir Oliver Franks replied that since the practice varied among the individual CEEC countries in their past treatment of such investments, the CEEC Delegation would prepare a note on this subject and transmit it to the U.S. Government.

Speaking on the behalf of the CEEC Delegation, Sir Oliver Franks expressed appreciation for information on the basic lines of U.S. thinking at present. In particular, the CEEC Delegation was encouraged by the expression of U.S. views on the following points: (a) the fact that the U.S. conceives the program in terms of a program for recovery and not relief and the full appreciation displayed by the U.S. representatives on the need for flexibility in the program; (b) assurances with respect to the use of local currency counterparts of U.S. assistance; and, (c) the views with respect to the possibility of procurement outside the U.S.

1. These minutes, presumably prepared by the staff of the Advisory Steering Committee, were circulated as document ASC D–7/7, December 9, by Mr. Manfull, Secretary of the Committee. The meeting was held in the Department of State at 3:30 p. m.
2. Supra.
3. Not printed. Various missions subsequently designated certain individuals as their special representatives on matters concerned with the CEEC.