Foreign Relations of the United States, 1948, Germany and Austria, Volume II

740.00119 Control (Germany)/4–548: Telegram

The United States Political Adviser for Germany ( Murphy ) to the Secretary of State

top secret

Berlin , April 5, 1948—8 p. m.

797. Personal for Saltzman and Hickerson (Eyes Only). Re paragraph 2 mytel 766, April 2.¹

Report of working party on measures to improve economic cooperation between Bizonia and French zone now taking shape although not finally complete.² Following is summary of subjects discussed to date:

1. Financial reform. No problems foreseen on questions of taxation and banking. As to flow of funds between zones, French representatives will state later whether any restriction will be necessary.

2. Foreign trade. No essential differences with respect to payments agreements. Trade agreements existing at present between Bizonia and foreign countries are limited essentially to enumeration of commodities which would be of interest in mutual trade. Most recently concluded agreement with Greece specifies quantities and estimated costs. French zone trade agreements specify nature, quantities, and values of commodities to be exchanged during given period. All trade of zone is covered by such agreements except trade with France. No report yet available on trade between the zones and respective occupying powers. On export procedure, MG control of exports in French zone amounts to an export monopoly under French direction while in Bizonia return of export trade to German exporters under MG supervision is far advanced. Re import-export price policy, there is no difference at present in policy of pricing exports and imports, but Bizonia is about to introduce a system based upon a uniform conversion factor of 30 cents to the mark with the exception of food and fuel. No information yet on customs and tariffs.

3. On interzonal trade the differences are found to be of degree and not of principle. It is therefore recommended in principle: (a) to eliminate permit system and to abandon such controls as are not required to insure reasonable balance of trade between the two areas; (b) present system of agreements might well be replaced by allocations system designed to equalize in advance the results of the exchange of certain commodities. No essential differences exist between the two areas on internal trade. There appears to be no economic objection to the abolition of restrictions on movements of persons. Re rationing of foodstuffs, no substantial barriers exist to closer cooperation other than existing differences in ration level and in degree of control exercised by French MG. Systems of distributing consumer goods are in substance the same. Re wage and price policy, no great differences in two areas to date which are likely to make future coordination difficult, although certain marked differences exist in administration of price control. French give general support to recent revised price policy of Bizonia subject to reservation that it is premature to give extensive executive power to German authorities in this field.

4. On transport, in French zone allocation of materials and movement priorities are MG responsibilities while in Bizonia they are German responsibilities. There exists central German transport administration in Bizonia but not in French zone except for railroads. No difficulty foreseen in assimilating highway transport except as raised in preceding sentence. In French zone railways are controlled by Laender and railroad union representatives; in Bizonia railways are controlled by agencies of Economic Council. For inland water transport, Bizonia has a German organization responsible for operation of traffic. As few Rhine craft are based in French zone, French authorities requisitioned all vessels and these are operated by a German organization under French director. French representatives state that before releasing vessels and before combining traffic operations question of decartelization and future limitation of German Rhine fleet should be decided. Re civil aviation no substantial divergencies but differences in practices make desirable establishment of agency for coordination.

5. No report from subcommittee on communications as yet.

6. No report from subcommittee on statistics (measures for securing uniformity in Bizonia and French zone) as yet.

Sent Department 797; repeated London, personal for Douglas, 112; Paris, personal for Caffery, 137.

Murphy

1. Ante, p. 160.
2. The text of the Final Report of Working Party No. 2, document MGO/P(48) 11, April 7, 1948, is not printed. The report of the Working Party and its six subcommittees comprised 33 pages.