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

740.00119 EW/12–848: Telegram

The Ambassador in the United Kingdom (Douglas) to the Secretary of State

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London, December 8, 1948—5 p. m.

5157. For Lovett from Hoffman and Douglas. Hoffman has discussed with Saltzman and me Deptel 4538,¹ and we have discussed prohibited and limited industry aspects with Humphrey. Our comments are as follows:

1. As to the 10,700,000 tons a year permissible production of ingot steel, at a meeting the afternoon of December 7 with representatives of British Government and French Government and Hoffman, Humphrey and three members of his committee present, and Saltzman. Douglas stated, in accordance with Deptel 4535,² that any retention of plant capacity in the steel industry now on the reparations list was not related to the 10,700,000 tons permitted production of ingot steel; that the US Government was not contemplating suggesting in the immediate future that this level of production be increased; that it should be continued until the conclusion of a German peace settlement or, if the settlement is unduly delayed and postponed, at an earlier date. Douglas also stated the relevant substance of the balance of Deptel 4535.

2. Question of prohibited and limited industries was raised in the meeting and subsequently by Mr. Bevin during the course of a conversation he had with Mr. Hoffman, Mr. Harriman and Douglas.

As to this category of industries, it is our view that it is one of military security, and that in respect of:

(a) Prohibited industries: the Military Governments should proceed promptly to reach an agreement and either to destroy, if this is the appropriate procedure, or to place on the reparations list all plants in this category without review by the Humphrey Committee;

(b) Restricted industries, which are also related to military security and not to European recovery: all plant capacity in excess of that permitted to be retained be placed upon the reparations list without further review by the Humphrey Committee; (in regard to at least steel, which is a restricted industry, the Humphrey Committee will have completed its task when it submits its report as a result of its present examination and review).

(c) Deletion, if any, from the prohibited and limited category of industries: any plants released for reparations be reviewed by the Humphrey Committee, since under these circumstances such plants are not related to military security.

3. As to that portion of paragraph 5 of Deptel 4538 which refers to ad hoc decisions affecting matters of security, we have no comment to make.

4. As to paragraph 5, we have no comment to make since we doubt that there has been any change in US policy in this connection.

5. As to paragraph 7 of Deptel 4538:

(a) We think it may be appropriate to restate the policy of the US Government with regard to demilitarization.

(b) We have, we think, covered the matter of prohibited and limited industries. In this connection, however, we would add that if there is any disagreement among the Military Governors on this point, as we understand is the case in regard to synthetic oil and synthetic rubber, we suggest that the normal procedure of submitting such disagreements to governments for resolution be followed.

6. At the meeting with Mr. Bevin, attended by Mr. Hoffman, Mr. Harriman and Douglas late in the afternoon of December 7, Bevin raised:

First, the matter of the recommendation of the Humphrey Committee; and

Second, the question of prohibited and limited industries.

As to the first, Bevin said he was very anxious to reach an agreement and dispose of the matter, but that he would naturally have to consider the French preoccupation and apprehensions. His own advisers have told him that by Friday they would have had a sufficient opportunity to examine in greater detail the material which has been discussed with them by the Humphrey Committee and to give them more definitive views.

As to the second, he referred to the aide-mémoire which was submitted and which was quoted in Deptel 4538, and urged that the question of prohibited and limited industries be promptly disposed of.

7. Please pass to ECA.

8. An urgent and favorable reply to comments contained in paragraphs 2 and 5(b) above would be, we believe, most helpful in bringing us closer to a tentative approximate agreement with British and French on retention of plants.³

Sent Department 5157, repeated Paris 1001. [Hoffman and Douglas.]

Douglas

1. Not printed; it transmitted to London the text of the British Embassy memorandum of December 4, p. 838.
2. Not printed; it transmitted a portion of the text of the letter of December 3 from Acting Secretary of State Lovett to E.C.A. Administrator Hoffman, p. 836.
3. Telegram 4593, December 9, to London, not printed, repeated as 1933 to Berlin, replied that the Departments of State and of the Army agreed to the relationship of the E.C.A. to prohibited and restricted industries as suggested by Ambassador Douglas and Administrator Hoffman (740.00119 EW/12–848).