840.6362/5–1647: Telegram
The Secretary of State to the Embassy in the United Kingdom
niact
us urgent
2142. This is Lasco 323. Refer Salco 490 and 491.1 1. Urpara 1. Your interpretation correct.
2. We had interpreted Salco 487 to mean that French might reopen Saar question rather than argue against UK allocation on ground of equity. French are in contradictory position in ECO if they (a) oppose UK allocation on ground of equity and then (b) argue that if UK obtains allocation of US coal, say, at 200,000 tons per month, then, in order to restore equity, France should count Saar coal as indigenous production. As long as France argues on basis of (a) alone she may be on strong ground, depending, however, on comparative level of [Page 508] satisfaction in relation to UK. However, she cannot both defend (a) and propose (b) as a method of restoring equity, for if (b) were adopted, then both UK and France would benefit at expense of rest of ECO. If we were to inform UK to withdraw request simply because French were attempting to reopen Saar coal question we should, in effect, be bowing to French argument whereas French case, in terms of (b), does not have any merit within ECO framework. Rather than back down, UK should oppose French attempt to bargain US coal. UK should counter French position by pointing to its obvious unfairness to other ECO claimants and to its inconsistency with principles of fair distribution which ECO has been trying to formulate. UK might also indicate to French that US would obviously oppose a bilateral deal outside ECO between UK and France involving US coal.
3. Assuming that UK is opposed to bilateral deal French have in mind, it need not necessarily follow that UK withdraw her request for coal in order to keep French from reopening question of Saar. We assume that if French are informed by UK that no deal on Saar can be made outside ECO, and that UK and US in any case will oppose tripartite settlement of Saar even in ECO, then France will not broach this question in ECO, at least with any success, and that France therefore will have to shift full weight of her opposition to issue of equity, assuming she really wishes to oppose UK allocation in absence of opportunity to bargain for Saar. On this score, strength of her case obviously depends on French level of satisfaction compared with British. UK 1947 level of satisfaction for internal consumption, excluding bunker coal, about 109% of 1935–38 average. French third quarter supply estimate follows (in millions of tons):
| Gross production of clean coal | 13.250 |
| Allocation from US | 2.700 |
| German availability | .720 |
| Polish availability | .210 |
| Other availability | .130 |
| Total | 17.010 |
Assumptions follow: (1) French output in 1947 53 million tons. (2) US availability 9 million tons and French proportion 30% as in second quarter. At availability of 7.8 from US, French share would be 2.34 million while at availability of 10 million from US, French share would probably be in excess of 3 million. Note however, that US will restrict allocations to 7.8 pending outcome strike threat. (3) German availability and French share assumed to be same as for second quarter. German exports, however, may be reduced in third quarter owing to recent reduction in Ruhr output, and to food shortage. (4) Polish availability to France assumed at second quarter level. This, [Page 509] however, is dependent outcome of Polish-French negotiations and if embargo not lifted France will get no Polish coal. (5) Other imports roughly same as second quarter.
About 80,000 tons should be subtracted as probable exports making probable total net supply of 16.930 million tons on gross production basis without 10% adjustment and without deduction of low grade coal. These deductions have not been made for UK either. French quarterly requirement on 1935–38 base about 17.5 million tons. French therefore, may satisfy about 97% of 1935–38 level of satisfaction. The event may prove supply to be substantially lower than 16.930 or even higher by some 600,000 tons.
While this is below UK level of satisfaction, it does not give French overwhelming basis for argument, especially in view of large UK export trade. Other ECO countries would have much better case for opposition but are apparently not prepared to oppose UK. Furthermore, if at rising levels of export availability, especially from US, some countries reach saturation point for US coal, France will have an opportunity to increase her share of US coal, because from dollar supply position she evidently has higher cut-off point for US coal than other countries. As French share of US coal rises not so much by virtue of allocation formulae alone as by virtue of her willingness to spend dollars for coal, UK chance of obtaining allocation should improve.
4. Depts position as outlined Lasco 311 has not changed. However, imminent possibility that France may try to exercise veto over UK’s request has drawn out some implications of our position. While we still believe strongly that UK should not obtain allocation if it leads to bitterness and damages ECO we believe that UK should not necessarily retreat at first sign of resistance on part of France. Reasonableness of French position and lengths to which she is prepared to go in opposing UK, should, if possible, be carefully weighed before British request is withdrawn. While there is danger to ECO in following this course, since UK and France may involve themselves too far in argument within ECO to make graceful retreat, we should use all possible judgment before permitting France to exercise absolute veto power. While our cardinal principle is preservation of ECO, considerations adduced above give us some flexibility in determining whether or not UK should be supported even in face of some opposition. If price for a UK allocation is serious damage to ECO, then we shall not support UK. However, that may not necessarily be case. It will therefore be up to Emb and MEA, who are on spot, to weigh developments and take whatever course seems best in relation to Dept’s desire to preserve ECO as working organization. We need neither [Page 510] favor nor oppose either France or UK in advance but rather should take an objective attitude permitting our final position to be determined by merits of case.
5. US Coal Operating Committee, in considering third quarter coal availability for Europe and North Africa, agreed on May 15 that a third figure of 3.4 million tons monthly should be submitted to ECO. Basis of additional estimate is performance during first 13 days of May, which have run at monthly rate of 3.3 to 3.4 million tons. Loadings through Hampton Rds are in excess of previously estimated movement through that port and account for improved performance.
This leaves US position as follows: Three levels of US availability are submitted to ECO, at 2.6, 3.0, and 3.4 monthly for third quarter. If a serious mine suspension occurs, exports for quarter will probably not exceed lowest figure. If a contract is signed with the Union by July 1, if actual work-week at mines is not cut appreciably, and if there is no maritime strike 3.4 million tons monthly allocation might be adopted here. Please give us soonest pattern distribution at each of three levels. Note that ability to allocate depends on extension of Export Control Act.
6. You may discuss contents para 2 through 5 with UK.
Sent to London as 2142, repeated to Paris as 1803, repeated to USDel ECE Geneva for Porter as 405.
- Neither printed.↩