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

840.50 Recovery/12–448

The British Embassy to the Department of State ¹

Memorandum

His Majesty’s Government have been giving serious thought, in the light of recent developments, to the problem of the industrial demilitarisation of Germany. In their opinion this problem has important security, political and economic aspects, all of which require careful and simultaneous consideration. We are on the threshold of achieving our immediate political aims in Western Germany, and we hope that the establishment of a Provisional German Government will coincide with a new phase of cooperation between the Western Allies in the control of the three Zones of Occupation. At such a moment it is imperative that there should be complete understanding between the three governments concerned as to the objectives of their policy, and as to the means by which those objectives should be reached.

2. The Anglo-American level of industry plan of August 1947 represented a broad measure of agreement, and was believed by His Majesty’s Government at the time to provide a satisfactory foundation on which allied policy towards the German economy could be built. Admittedly it needs to be applied in present circumstances to the whole of Western Germany including the French Zone; and it calls for some review in order to take account of the German contribution to the European Recovery Programme. It also needs to be completed by decisions relating to certain prohibited industries in respect of which the plan itself envisaged that the existing provisions might be subsequently reviewed, and by provisions for the enforcement of demilitarisation and industrial disarmament in accordance with the broad principles agreed during the London talks which concluded in June of this year. With these amendments and additions, it forms, in the view of His Majesty’s Government, a satisfactory framework within which to plan long term economic policy for Germany.

3. Ever since the German surrender, it has been a primary concern of His Majesty’s Government that their policy and that of the United States Government should remain in step. This aim has been steadfastly pursued as United States policy towards Germany has evolved over the past three years. In particular His Majesty’s Government have fully appreciated that the very great financial contribution which the American people are making to the support of the Bizone and to the European Recovery Programme endows the problem of German recovery with a special sense of urgency in the eyes of the United State Government. Though anxious to complete the Reparations Programme with all speed, and thus remove a running sore in relations between Germany and the Western Allies, they have nevertheless cooperated fully with the United States Government in the review of the Reparations Programme in the British Zone over a period of eight months. It has been their constant hope that this review would be completed at an early date, and that thereafter the uncertainties surrounding the various aspects of allied policy on industrial disarmament would be finally removed. It is hoped that the forthcoming meeting in London with the members of the Humphrey Group will contribute to this end.

4. Some recent expressions of view by United States representatives on this subject have accordingly given them concern. They understand for example that the review of the Humphrey Committee, unlike that of the Wolf Committee, is being conducted on the assumption that the permitted level of steel production of 10.7 million tons a year will not be maintained. It has been suggested by the United States Military Governor in the course of discussions on the prohibited industries that decisions on the level of such industries might be subject to further revision in the light of the views of the Economic Cooperation Administration, as would the agreed level of steel production itself. It has also been proposed that in certain cases plant above the permitted level should be allowed to remain in Germany; whereas in the view of His Majesty’s Government any prohibition or limitation not accompanied by the removal of surplus capacity is not worthy of the name. The United States Military Governor is understood to have already referred to the United States Government the objections raised by his British and French colleagues to this proposal. British representatives in Germany are also from time to time faced with requests for ad hoc decisions affecting matters of security which are not in accordance with existing agreements and tend to disregard the cumulative effect of such decisions upon the general security problem. His Majesty’s Government trust that these indications do not foreshadow a change of policy on the part of the United States Government.

5. The United States Government is already aware of the views of His Majesty’s Government on the importance of the effective demilitarisation of Germany from the direct security point of view. In their opinion neither the international situation nor the present political and economic position of Germany dispel the possibility of a resurgence of German military power at a future date, whilst the danger of German war potential being put to effective use by an invading power has greatly increased. But there is another, and perhaps more immediate aspect of the problem to which it is desired to draw the attention of the United States Government. The successful organisation of a Western European defence system, and the realisation of wholehearted Western European cooperation in both the political and economic spheres equally required that the former victims of Nazi aggression shall be given tangible assurance that Germany shall not again be permitted to become a menace to security. Such assurance is an indispensable pre-condition of effective and confident cooperation between those states and a healthy and prosperous Germany; to such cooperation His Majesty’s Government, like the United States Government, attach the greatest importance.

6. By contrast, continued delay in reaching final decisions on the details of the level of industry plan—in particular on the industries to be subject to continuing prohibitions or limitations—and the removal of surplus equipment is bound to create a loss of confidence and may even bring about internal strains which will shake the position of existing Governments, and so have far-reaching political consequences in Western Europe. Before a German Government is formed it is imperative that our plans in this field should be completed and should form a clear basis on which the Allied Military Security Board can operate. For both these reasons very early decisions appear essential.

7. His Majesty’s Government believe that, in the interests of both harmony and speed, it would be desirable that these matters should, if possible, be negotiated by the Military Governors, rather than discussed between Governments. They therefore ask that the United States Government should restate its policy with regard to the demilitarisation of Germany; authorise the United States Military Government to reach an accord on the revision of existing agreements relating to the prohibited and limited industries which shall be made effective by the removal of equipment surplus to the security level laid down, while taking account of the needs of European recovery; and confirm the United States Government’s agreement with regard to the level of the German steel industry on which the industrial demilitarisation of Germany so much depends. They urge that this action should be taken at a very early date.

Washington, 4 December, 1948.

1. The text of this memorandum was transmitted to Ambassador Douglas in telegram 4538, December 4, to London, not printed. The telegram observed that the Department did not propose to make an answer until the Humphrey Committee had concluded its discussions in London. “Ambassador Douglas and E.C.A. Administrator Hoffman, then in London, were asked for their comments on the memorandum (740.00119 EW/12–448).