Foreign Relations of the United States, 1948, Western Europe, Volume III

Paris post file, Box 665, 1948 TS, 850 USFAP

The Acting Secretary of State to the United States Special Representative in Europe (Harriman), Temporarily at Washington¹

top secret

Washington, December 3, 1948.

Dear Mr. Ambassador: In your letter of November 23, 1948 to Secretary Marshall, you pointed out the importance to you of understanding our policies, or at least our approach, with respect to five broad questions. The Secretary touched upon certain of these questions in a general way in his subsequent conversation with you and Mr. Hoffman, but he has asked me to send to you the Department’s written comments for your information and guidance. Accordingly, I am enclosing herewith, as Tabs 1 to 5 inclusive, five memoranda setting forth the Department’s comments.²

I appreciate that these comments are not fully responsive to all of the broad questions raised by you. You will realize, however, that the uncertain and fluid state of world conditions makes impractical, if not impossible, fixed and rigid policies in certain of the fields mentioned. Moreover, final determinations of policy in certain of these fields will require consultation with other Departments of the Government. Nonetheless, I believe and hope that you will find the enclosures helpful.

As you point out, close coordination between ECA policies and our national policies on these important questions of foreign relations is essential. Therefore, we shall be most interested in any comments or further questions you may have with respect to these matters, and shall continue to keep in close touch with you on them as our policies evolve in response to changing world conditions.

[Enclosure—Tab 1]

Question raised by Mr. Harriman:

“The general form of organization of western Europe which we desire to see developed and what we expect of the OEEC and its role in the over-all concept.”

Comment:

1. Our objective should continue to be the progressively closer integration, both economic and political, of presently free Europe and eventually of as much of Europe as becomes free. We do not yet know what form of permanent over-all organization will best meet the needs of free Europe.

2. Integration must be developed voluntarily by the free European countries; it should not be imposed from without. However, the European governments are unlikely to take the bold and difficult measures essential to accomplish effective integration in the absence of continuing pressure, and assistance, from us. Our position should therefore be to encourage strongly the taking by the Europeans themselves of (1) any steps which promote the idea of European integration, (2) decisions as to the concrete objectives to be sought and their practical implementation as rapidly as the technical problems can be solved, and (3) other practical steps which tend towards closer working relations. We should avoid premature endorsement of any specific proposals or of any particular form of European organization.

3. During the next three or four years the move towards closer integration will probably develop along four main lines: (1) on a fairly broad but practical economic base through the OEEC; (2) on a geographically more restricted but probably even more concrete mutual security basis through the Brussels Pact and the North Atlantic Pact; (3) on a broad political base, probably vague in form at least in the immediate future, such as the British proposal for a “Council of Europe” comprising periodic meetings by Prime Ministers or other Cabinet Ministers with a committee and secretariat structure patterned on the United Nations or such as the French proposal for a consultative “European Assembly”. These may be less productive of concrete measures but, by making “integration” a stated goal, will provide impetus to the solution of the many technical problems which must be met; (4) through a series of more limited sub-regional groups such as the Benelux Union, a closer drawing together of the Scandinavian countries and a possible French-Italian Customs Union.

4. The OEEC has a two-fold role: (1) to insure the success of the European Recovery Program and the achievement of a sound European economy and (2) to further economic cooperation and integration among the participating countries. Within the general framework of a progressively closer integration of Western Europe, the OEEC should be the principal organ for bringing about closer relationships in the economic sphere. It is our hope that through the OEEC the participating countries will take many practical steps toward genuine economic integration. It should be our policy to encourage the organization in this direction and to encourage the participating countries to strengthen the organization so that it can perform these functions.
At the present time it would probably weaken rather than strengthen the OEEC were it to be expanded to form the foundation for a political union.

5. “Integration” will thus proceed at a different pace in the various fields of interest and with somewhat different participants in each case. This is desirable if the pace is not to be set by the slowest.

6. It is essential for the British to take the lead in working towards closer European integration. However, at least at the present time it would be unwise both for them and for us were a position of strong European leadership to require a lessening in British ties with this country and the Dominions. By a series of overlapping but not necessarily co-extensive groupings, e.g. Brussels Pact, North Atlantic Pact, it should be possible to provide assurances to the British that real steps toward closer union with Europe can be taken without prejudice to their commonwealth relationships or their particular ties with this country.

7. In the view of the Department of State, we must recognize that the possibilities for the organization of Western Europe are definitely limited by the great area of uncertainty and disagreement surrounding the future of Germany. Long-range plans for European integration which are vague about Germany’s participation or which imply admission of the Germans as second rate members, under handicaps and economic penalties not shared by others, are unrealistic. Until we can make progress in getting certain of Germany’s neighbors, above all France, to take a constructive and healthy attitude toward Germany’s future role in European affairs, projects of European Union more ambitious than ones outlined in paragraph 3 above are unlikely to be realized.

[Enclosure—Tab 2]

Question raised by Mr. Harriman:

“Our attitude toward the Atlantic Pact both in relation to Western Union and the participating countries.”

Comment:

1. A North Atlantic Security Pact is an essential supplement to the Marshall Plan. It is designed to contribute to restoring a sense of security in the area, development of defensive power thoughout the area, and act as a deterrent to outside aggressive forces. It should support recovery by giving the Europeans greater confidence to proceed with their efforts in this direction.

2. It should be considered a supplement to and in no sense a replacement for the efforts toward European unity, which, we feel, as stated in Tab 1, that the European countries should make. In the exploratory conversations held here from July to September with representatives of the United Kingdom, Canada, France and Benelux, it was agreed that additional steps ought to be taken “to bring about a substantial and permanent degree of cooperation and unity” among the peace-loving countries of Europe, but that in addition to these steps “those nations having a primary interest in the security of the North Atlantic area should collaborate in the development of a regional or collective defense arrangement for that area”. It is clear that we are dealing here with two separate, though complementary and over-lapping, concepts and that they should not be confused with one another.

3. We consider that initially the North Atlantic security pact should embrace the United States and Canada, the Brussels powers, and the “stepping stone countries”—Norway, Denmark, Iceland, Portugal, and perhaps Ireland, and provide satisfactorily for Italy. It is our present feeling that Italian membership in a North Atlantic Pact should come about through membership in the Brussels pact but that the latter question, including that of timing, is one for decision by the present parties to the Brussels Treaty.

4. We do not feel that a North Atlantic Security Pact should bear any relation to the OEEC as such. On the contrary, we consider it important that the OEEC should retain at least at the present time its specific character as an international organization neither political nor military in nature and devoted solely to the purpose of European economic recovery and the promotion of economic integration. Any deviation from this principle would reduce tremendously the drawing power which OEEC still has for Eastern European countries and, accordingly, the strain which its existence therefore places on relations between those countries and Moscow. It would also cause difficulties for countries such as Sweden and Switzerland which are prepared to participate in economic cooperation but presently doubtful about political or military measures.

5. The Brussels Treaty system will continue as an integrated group within the North Atlantic system and its existing military machinery will be continued merely with formalization of existing U.S. participation and the probable participation of other North Atlantic countries. We regard the Brussels Treaty system, as Bevin originally described it, as the nucleus of a Western European union.

[Enclosure—Tab 3]

Question raised by Mr. Harriman:

“Our general approach to the rearming of Western Europe, particularly in respect to Western Union and how far we are prepared to integrate our own security plans.”

Comment:

1. A program for the rearmament of Western Europe, in connection with the North Atlantic security system, has top priority on the legislative programs of both the NME and the Department for the forthcoming session of Congress. It will be based on “continuous and effective self-help and mutual aid” and we desire that it consist primarily of implementing a coordinated defense and supply program now being elaborated by the Brussels Treaty Permanent Military Committee with U.S. participation, with each Government contributing what it most effectively can.

2. In the Western Union countries generally, a rearmament will require some increase in domestic expenditures for military purposes. It will call for some diversions of resources from recovery programs. However, a successful program of common defense with U.S. participation and assistance will bring a degree of security which could not be attained in any other way and which should facilitate recovery through increased confidence.

3. On the other hand, we feel strongly that economic recovery must not be sacrificed to rearmament and must continue to be given a clear priority. We do not feel that rearmament expenditures should be permitted to bring about any serious reduction in the allotment of European resources to the recovery effort.

4. It is equally important that in the development of a rearmament program for Western Europe, due consideration be given to the limits of U.S. financial and material aid available. Thus, a balance should be struck between the needs of our domestic economy, our own rearmament, our contribution to European recovery and our contribution to European rearmament.

5. The Western European countries should not be permitted to formulate a program of rearmament of substantially larger dimensions than the European or U.S. economics could support under the principles outlined above. The psychological effect on the Western Europeans of the knowledge that a program agreed by their military leaders could not be met might be disastrous. Such knowledge would be a boon to the USSR.

6. It is, therefore, considered important that U.S. representatives participate fully in the development of a Western European rearmament program to ensure that the end product is realistic, having in mind European and U.S. resources.

7. Because of the impact of a rearmament program on the European economy, close cooperation will be necessary in Europe between the U.S. representatives working with the Western Union military staff planners, particularly our representative on the Western Europe Military Supply Board as soon as one is appointed, Mr. Harriman’s ECA Mission, and a political representative to be designated by the State Department for this purpose at once. There must also be close coordination between the Europeans of the economic aspects of rearmament and ERP. It is our understanding that the foreign ministers of the Brussels Pact countries have arranged for their OEEC deputies to study this problem outside of OEEC.

8. The financing of rearmament programs and the machinery for handling them should be kept separate from ERP.

9. The Department of State considers it important that in the final determination of military aid to be rendered to European countries we bear in mind that it is the psychological effect, rather than the intrinsic military value, which is of primary importance in this connection. It is also necessary that such aid be accompanied by effective propaganda effort to popularize it with the European people (public).

[Enclosure—Tab 4]

Question raised by Mr. Harriman:

“Our policies toward France, particularly in the manner in which our influence can be exerted toward the attainment of greater political and financial stability.”

Comment:

1. We are attempting to follow two general principles with respect to France:

(a) We should support any non-Communist French Government by all reasonable means short of direct interference in the internal affairs of the country.

(b) Economic aid to France must follow the terms and spirit of the Foreign Assistance Act and the bilateral agreement. We cannot continue much longer to provide aid in amounts substantially larger than those which would be justified if France put her own house in order. This will necessitate a steady though gradual reduction in the volume of aid below present levels over the next few years.

2. We face a dilemma in attempting to reconcile these two principles. Since France is saddled with the most powerful and most highly organized Communist party of any country in Western Europe, the attainment of the objectives of ERP in that country will inevitably be more costly than a strictly economic approach to the problem would warrant. The goal of ERP is fundamentally political and France is the keystone of Continental Western Europe. Further deterioration of the French situation, economic and political, which would be certain to result if ERP aid were drastically reduced in present circumstances, might nullify the whole program. The effect on Western Europe should France succumb to Communism needs no comment.

3. The dilemma would not be solved by the elevation of de Gaulle to power. A de Gaulle Government would be faced by the same difficult economic, financial and social problems as beset the present government and would, we believe, have no effective program for resolving them. However, it is believed that, if de Gaulle did come to power in the near future, his attitude toward French labor would make even more difficult the building of the cooperative French national spirit needed to bring about real economic recovery. There would be very real possibility of even greater deterioration and of widespread civil disorder.

4. Because of the factors mentioned in paragraph 3 and of de Gaulle’s attitude on the German situation, we should not take any action which could be interpreted as exerting our influence in favor of de Gaulle. Any high level contact with de Gaulle at this time would be so interpreted. On the other hand we should avoid action now which would increase our difficulties in dealing with General de Gaulle in the event that he does come to power.

5. It is of prime importance that the French party leaders and the French people be made to realize the essential necessity for France’s own good of developing a strong, unified and cooperative non-Communist government. In the final analysis, the decision rests with the French leaders and people. There are definite limitations on the pressures that the U.S. can exert to this end.

6. The senior U.S. representatives dealing with the French should

(a) emphasize at every possible opportunity to the French non-Communist party leaders the essentiality of putting the French house in order constitutionally, politically, economically and financially, impressing upon them the urgent need for such measures as increasing taxation, decreasing government expenditures, adopting credit controls, etc. We should also stress to French leaders the necessity for calling on the agricultural and commercial classes to make their fair contribution to French fiscal and economic stability. Concurrently we should point out that any real increase in the standard of living of the workers will depend upon the successful implementation of the above measures and upon an increase in production.

(b) stress as often as possible to French leaders of all non-Communist parties, the difficulties which France’s political instability and slow rate of recovery will entail in connection with obtaining further appropriations from Congress. We should emphasize that we are not attempting to take sides in internal French politics and that our primary interest is the development of a strong, unified and cooperative non-Communist government; that the American people and Congress will not understand the reason for continuing substantial aid to France if all French non-Communist party leaders fail to join together in establishing and supporting the type of government required to put the French house in order. Without giving advice concerning specific steps which might be taken, we should impress upon these leaders the absolute necessity of further action which will facilitate the presentation of the question to Congress. We should also caution them that, in the very nature of things, they must plan for steady though gradual reduction in the volume of aid.

7. In the event de Gaulle should come to power, we should maintain the same line. While it is doubtful that any argument will make much impression on the General himself, particularly in view of his recent remarks to the effect that France has managed to exist several centuries without Marshall Plan aid, the various political leaders who will have rallied to his banner could probably be counted on to cooperate with us in this respect. We should also impress upon these leaders the necessity for adopting a more liberal attitude toward French organized labor than is presently contemplated by General de Gaulle.

. . . . . . . . . . . . . .

9. It is recognized that France is one of those places where the situation is in so extreme a state of flux, and so sensitive to almost unpredictable shifts and moods of public opinion, that little useful purpose can be served by attempting to draft in Washington a detailed program which can effectively and usefully govern operations on the spot. Accordingly, there is need for the best possible local coordination and integration in Paris of all phases of the United States Government effort: particularly the diplomatic, ECA, military and covert political warfare operations. We need there something in the nature of a tactical command for the day by day development and implementation of policy on the spot.

The Department recognizes that present arrangements are inadequate and will take action as soon as possible to achieve a better arrangement.

[Enclosure—Tab 5]

Question raised by Mr. Harriman:

“Developments in our policies in Germany.”

Comment:

1. We must not permit Germany to be drawn into the Soviet orbit or be reconstructed as an instrument of Soviet policy. The Soviets have been intransigent toward all previous attempted quadripartite solutions not involving this probable result. Therefore, our current policy must be to bring Western Germany into close association with the free democratic states of Western Europe and enable it to contribute to and participate in European economic recovery. Hence we are working with the UK, France and the Benelux countries toward implementing a provisional settlement in Western Germany. This program, as embodied in the London Agreements, should make possible economic recovery in Western Germany through full participation in ERP and the establishment of a provisional government while at the same time providing for security against German military revival and assuring the ERP countries equitable access to the resources of the Ruhr through an International Authority.

2. In the implementation of the London Agreements we have encountered serious difficulties with the French. The crux of the problem is French concern over Germany’s rapidly reviving economic power and the high level, relative to France, which it must be allowed to reach if Germany is to become self-sustaining. We must take all possible steps to allay French fears consistent with conditions which would give Germany a chance for economic recovery. We should try to convince the French that their security can be achieved by measures such as the London Agreements for consultation among the three occupying powers in the event of any threat of German military resurgence and the creation of a joint security board with powers of inspection, the agreement on limitations on German production, the agreement to establish an International Authority for the Ruhr, and the Brussels and North Atlantic pacts. These measures, with full U.S. participation and support, should more effectively promote French security than an effort to keep Germany at an economic level below that which is necessary for her to become self-sustaining and make her full contribution to ERP or to impose controls which would make impossible German recovery.

3. We should push the review of plants for retention in Germany to completion and wind up the reparations program as quickly as possible. In order to attain that objective a major problem which must be resolved promptly is the question of possible revisions in the presently agreed limitations on level of industry. On economic grounds upward revisions, particularly in steel, may be desirable. We understand that there is a possibility that the Humphreys Committee will recommend to ECA the retention in Western Germany of steel producing plants (presently slated for dismantling and reparations) which would result in a substantial increase in steel capacity above presently agreed levels. We also understand that Mr. Harriman may feel that dismantling of steel plants should cease, because of the world steel shortage. However, we must consider whether negotiation of an upward revision with the French and the other countries concerned is politically possible or desirable at this time.

4. The current improvement in the German economic picture and the likelihood of Germany’s emerging, at least partially, from occupation status suggest the desirability of reviewing present administrative arrangements within the U.S. Government for the formulation and implementation of German policy. The desirability of having Germany enter into ERP and the Western European community on as equal a basis as possible with the other countries suggests the importance of more effective control over German policy by the Department of State, in consultation with ECA and the Department of the Army.

1. The copy in the Paris post file was unsigned. It had been sent to Ambassador Caffery as “a document which evolved from Mr. Harriman’s conversations with the Secretary and Mr. Lovett” by Mr. Hickerson, who also sent copies to Lewis W. Douglas and Robert D. Murphy.
2. A memorandum of December 3 by the Coordinator for Foreign Aid and Assistance (Labouisse) to the Under Secretary read as follows:

   “I am attaching hereto proposed letter for your signature to Mr. Harriman in respect to his November 23 letter to the Secretary, as well as five memoranda setting forth the Department’s comments on the questions raised in Mr. Harriman’s letter.

   “The memoranda have been approved by Messrs. Kennan—S/P, Nitze—E, and Achilles—EUR.

   “Mr. Harriman is leaving this afternoon. I told him yesterday that I would bring the papers over to him today, as soon as they were approved in the Department”