CFM Flies: Lot M–88: Box 2234: File–Reparation Plant Review
Memorandum of Conversation, by James P. Hendrick, Special Assistant, Office of the Deputy Administrator, Economic Cooperation Administration1
- Present: Mr. Bevin
- Lord Henderson
- Mr. Makins
- Mr. Stevens
- Mr. Hoffman
- Ambassador Douglas
- Mr. Harriman
- Mr. Hendrick
Subject: German Reparations
Ambassador Douglas explained in some detail the situation which had arisen in respect to Section 115(f) of the Foreign Assistance Act. He pointed out that, according to the understanding of the U.S., agreement had been reached that there would be no dismantling of plants which were on the Collisson Technical Mission List. He cited the letter from Secretary Marshall to Senator Vandenberg dated June 7, 19482 as indicating the agreement reached and pointed out that it was only fair to assume that if plants were to be considered for a possible retention in Germany that they would not be dismantled in the manner British plants are now being dismantled. The news that dismantling is proceeding at a rapid rate in the British Zone did not reach the U.S. until the end of August 1948 when Mr. George Wolf reported that dismantling was going on. This was later confirmed by other sources and led to a formal request of ECA, which was, thereafter, made by the State Department to the British to stop dismantling on the Cabinet Technical Mission retention list plants and a few others in which Congress was interested.
The fact that dismantling is going on is not generally known in the United States. The Chicago Tribune had a very bitter article on it but this was not picked up by the other papers.
The real danger, Ambassador Douglas said, lay in the fact that Congress was extremely exercised over the subject. A report had been prepared by Mr. Vorys, Chairman of a Sub-Committee of the House Foreign Affairs Committee, which was a blistering denunciation of the British attitude in this matter. Mr. Hoffman explained that the [Page 819] Staff of the Foreign Affairs Committee sought to circulate this report in such a way that it would undoubtedly have been made public. Mr. Hoffman had seen Congressman Eaton, Chairman of the House Foreign Affairs Committee, and it was agreed that the report should be kept “under wraps” for the present. Mr. Hoffman said that he did not mind if the report was made public after agreement with the British had been reached (although, even then he would prefer not to see it made public) but that if it was made public before agreement with the British had been reached, a real international situation would be created. Both Ambassador Douglas and Mr. Hoffman stressed the fact that feeling in Congress had run very high and that if an agreement could not be reached with the British, the entire ECA appropriation would be placed in jeopardy. They made it clear they did not wish to appear to be pointing a pistol at Mr. Bevin’s head; they were interested in one thing only and that was European recovery which was precisely the same thing Mr. Bevin was interested in. It was essential that Mr. Bevin give the most serious consideration to the problem and if dismantling could not be stopped, Mr. Hoffman and Ambassador Douglas could not answer for the consequences.
These remarks were supported by Mr. Harriman.
Mr. Bevin started by remarking almost in an aside that it would be quite impossible to stop dismantling. He said that the U.K. had been the victim of shuffling of policy in the United States. It was important that Congress should know the history of the reparations question for without it we don’t get the correct perspective.
U.K., Mr. Bevin said, was at the start under tremendous pressure to pastoralize Germany. Mr. Bevin had to resist this. The pressure from Ambassador Winant had been very great. Mr. Bevin had never wavered from the 10.7 million ton steel production figure for Germany which had been based on the 1936 level of industry in Germany, which, in turn, was prior to Germany’s abnormal development. Mr. Bevin did not want to take the most efficient plants away from Germany by way of reparations but was forced into this position by the United States and France. As a result, the German steel industry did not get going until this year—production is now at 7 million tons according to figures he received yesterday.
Mr. Bevin felt that the United States action in stopping delivery of the reparations to the USSR was a mistake but he could not help that.
At Yalta there was a discussion of sending capital goods out of Germany and payment of $10 billion cash.3 Mr. Bevin had told Mr. [Page 820] Churchill this must not be done. The United States did not make the same reservation. The U.K. was striving to avoid repetition of World War I problems.
At Potsdam Mr. Bevin had been surprised at the U.S. proposal that capital goods should be shipped out of Germany as reparations.4 This had been largely on advice of Mr. Pauley. Mr. Bevin, at length, agreed to this proposal but he was not happy about it.
The situation became acute in Moscow when there was discussion of war plants.5 In an effort to get a settlement, Mr. Bevin proposed then that the plants be cleared out of Germany by June 1948, taking into account the 10.7 steel level.
When E.R.P. was first discussed, Mr. Bevin was under the impression that Congress was very concerned over the reparations question but when Mr. Douglas conferred with him at the time of the passage of the Foreign Assistance Act he talked about the eventual retention of 25–30 plants in Germany under Section 115(f) of the Foreign Assistance Act. Mr. Bevin had agreed to this but he was still waiting for the list of plants.
Now, Mr. Bevin said, he received the Wolf report.6 He felt that what Mr. Wolf said about tube mill plants was correct and had asked that an examination be made of these plants. Mr. Bevin was apparently under the impression that dismantling had been stopped on these plants but he was advised by his assistants that this was not the case.
Mr. Bevin complained that the U.S. had proceeded on the line of what it can release, not on the line of what it can retain. This leaves the U.K. Cabinet in doubt. The Cabinet was led to believe by the State Department that it would get a list of plants in about a month. This was arranged in March. Later on Mr. Douglas told Mr. Bevin the list would not be 25–30; it would be about 70. But Mr. Bevin is still awaiting the list.
Mr. Bevin said he never agreed to stop dismantling. He asked whether the fact that the U.S. Congress was raising new points justified our throwing out agreements. Is the Congressional Committee to be the sole arbiter of what happens in Germany? Mr. Bevin stated he had great difficulty with his Administration. He would like to get a postive line—something he can do. It is well known that there is a number of plants the U.S. does not want to retain in Germany. [Page 821] Mr. Bevin felt he should have a list of those plants. Once dismantling is stopped, Mr. Bevin said, he is done. There is a growing demand in Parliament to stop dismantling and join with the USSR and get 10% cash from Germany out of current production. He felt that a cessation of dismantling was completely out of the question.
Mr. Hoffman pointed out that he had been asked by the Cabinet Technical Mission to retain 323 plants and by Congress to retain an additional 50. He could very easily have asked State Department to retain all 373. This would have been made public and if State Department had not succeeded in securing the retention of all or most of these plants a very difficult situation would have been created. What Mr. Hoffman did instead was to get a Committee appointed—the Humphrey Committee—with the view of cutting the list down to proportions. What Mr. Hoffman needs now, he said, is some help. He explained the proposed procedure of data sheets to be filled out and spot checks by engineers with a report to the Humphrey Committee.
Mr. Bevin stated that from the strategic point of view there was a great danger in leaving plants in Germany which the USSR could “take in 5 minutes.” He concluded “it is a squalling kid you have left in my lap. It is a very difficult political situation:”
Mr. Harriman pointed out if Mr. Bevin’s letter of October 17 were made public it would be misunderstood in the United States. It is merely a question of mutual cooperation and can be put to the British and IARA in that form.
Mr. Bevin complained that he had never been invited to look into this problem; that now the U.S. has sent a Committee and then sends its Ambassador to make representations. He indicated he might possibly slow down the dismantling and said he would send for General Robertson. He felt that it might be advisable for Mr. Humphrey to come over and meet General Robertson.
Mr. Bevin emphasized that he wished, under no circumstances, to announce that dismantling had stopped. He has a Parliament which he must consider. This is a very awkward political position which he is not prepared to face. At this point Ambassador Douglas suggested that it might be advisable for the Americans to confer with Lord Henderson, Mr. Makins and Mr. Stevens and endeavor to reach an agreement which could be presented to Mr. Bevin that afternoon.
- This conversation took place on October 13, 11 a. m. in Foreign Secretary Bevin’s office in London. E.C.A. Administrator Hoffman left Washington on October 11 for a trip to Europe to hold talks with Bevin. This memorandum was apparently prepared following Hoffman’s return to Washington.↩
- Ante, p. 759.↩
- For documentation on the conference of the heads of government of the United States, the United Kingdom, and the Soviet Union at Yalta, February 2–10, 1945, see Foreign Relations, The Conferences at Malta and Yalta, 1945.↩
- For documentation on the conference of the heads of government of the United States, the United Kingdom, and the Soviet Union at Berlin (Potsdam), July 12–August 2, 1945, see Foreign Relations, The Conference at Berlin (The Potsdam Conference) 1945, two volumes.↩
- The reference here is presumably to the meetings of the Allied Commission on Reparations in Moscow in 1945; for documentation on this Commission and related matters, see Foreign Relations, 1945, vol. iii, pp. 1169 ff.↩
- Regarding the report of the Wolf Mission of May–June 1948, see footnote 6 to telegram 3504, September 3, to London, p. 802.↩
- Ante, p. 814.↩