862.6511/12–348
The Acting Secretary of State to the Administrator of the Economic Cooperation Administration (Hoffman)1
My Dear Mr. Hoffman: Reference is made to an oral request by Mr. Wood of the Economic Cooperation Administration to Mr. Nitze of this Department on November 26 for a statement of the Department’s views as to the possibility of a change in the level of permitted production of steel in the bizonal area of Germany which is now fixed at 10,700,000 ingot tons. It is understood that Mr. Wood’s request related to the studies which are now being made of the German dismantling program by the Industrial Advisory Committee headed by Mr. Humphrey.
The present level of permitted steel production was fixed by agreement between the United States and United Kingdom Military Governors in Germany in the revised bizonal level-of-industry plan of August 1947, which was approved by the United States and British Governments. This plan involved an increase from the level of 5,800,000 tons for all of Germany, established in the quadripartite plan of March 1946.2 The bizonal level-of-industry plan was discussed in detail with representatives of the French Government prior to its publication. Later, at the meeting of the Council of Foreign Ministers in London in November–December 1947, agreement was reached to establish the permitted level of steel production for all Germany at 11,500,000 tons, a figure which corresponds to that previously established for the bizonal area. The CFM agreement was, of course, not made effective, owing to disagreements among the four powers on other matters.
The situation with respect to the amount of steel capacity to be retained in Germany differs radically from that relating to the amount of retained capacity fixed for other industries under the level-of-industry plan. In the case of other industries dealt with in the bizonal level-of-industry plan, the amounts of retained capacity were, in the view of this Government, effective solely in determining the capacity excess to the peaceful needs of Germany and hence available for removal [Page 837] as reparation. Any limitations of a continuing character on these industries for security purposes were to be separately determined. Except for such restrictions as might be imposed on security grounds, it has been the consistent view of this Government that Germany should be free to develop capacity in these industries in the future as required by the needs of the German economy.
In the case of steel, it has been the view of the British and French Governments that the restriction on production should be maintained indefinitely on security grounds. It has been the view of this Government that the present restriction is applicable only until the German peace settlement. The United States position with respect to continuance of a restriction after the conclusion of a settlement has been reserved. As you know, the list of industrial prohibitions and restrictions to be effective in Western Germany is now being studied, pursuant to the London Agreement on Germany, by a working party set up by the three Military Governors. The British and French have reiterated their views on the steel level in the working party, whose report will probably be submitted to the three Governments for consideration in the near future.
The motives which have led to the adoption of this restriction are, I am sure, fully familiar to you. I might recall, however, that an important consideration has been the belief that excessive development of the German steel industry, primarily for armament purposes, together with the effects of German occupation of Western Europe during the recent war, created a serious unbalance between the economic potential of Germany and other Western European countries, and a threat to security of the latter. The Western European countries have not only supported the limitation of German steel capacity but are engaged in extensive development of their own steel industries.
Under all the circumstances, the Department is of the opinion that any proposal by this Government to raise the permitted level of steel production in Germany at the present time would involve serious political repercussions and would be contrary to the interests of the United States. The Department believes that the present level should be continued in effect until the conclusion of a German peace settlement, subject to an understanding that it may later be reviewed if the settlement is unduly delayed.
The Department understands that the technical studies now being conducted by the Industrial Advisory Committee may involve the question of the maintenance of the present restriction on German steel production and that this subject may arise in the discussions which the Committee plans to conduct with experts of the British and French Governments in London beginning December 6. The Department would prefer that the matter not be raised. However, it does not [Page 838] wish to interpose objections which would interfere with the conduct of the Committee’s investigation. If the subject is raised, the Department would wish the American Ambassador in London, under whose chairmanship the meeting will be conducted, to make clear that the Committee is of an advisory character and that its studies have not been completed or reported to the United States Government. He should also state that after the studies have been reported, they will be reviewed in the light of all pertinent considerations prior to the adoption of a final Governmental position.
I propose to instruct Mr. Douglas in this sense, but would like to receive your comment before doing so.
I am sending a copy of this letter to Mr. Draper.
Sincerely yours,
- In a letter to the Acting Secretary of State, dated
December 9, not printed, Under Secretary of the Army Draper stated that he had received
a copy of this letter and that the Department of the Army had no
objection to the position stated here (862.6511/12–948).
Paragraphs 6 and 7 of this letter were transmitted to Ambassador Douglas in telegram 4535, December 4, to London, not printed. The telegram stated that the full text of the letter was being brought to London for the Ambassador. (740.00119 EW/12–448)
↩ - Regarding the level of industry plans of March 1946 and August 1947, see footnote 2 to telegram 4557, November 26, to Paris, p. 834.↩