840.50 Recovery/3–2848: Telegram
The Ambassador in France (Caffery) to the Secretary of State
us urgent
1633. Rece 44. With return members CEEC working party to their respective countries for consultation, a stage has been reached where it is possible to appraise progress made, the developing pattern for the continuing organization and the major remaining obstacles to full cooperation in the economic field and to an integrated economic recovery program.
I—Those of us who during past week sat in on the drafting committees and exchanged views with the executive committee have been greatly impressed with the unity of purpose, the hard work, resourcefulness and teamwork of the delegates. Furthermore, recent political developments in Europe and the critical financial situation have emphasized the interdependence of CEEC countries and have created a sense of urgency among the delegates which was not apparent at last summer’s Paris Conference.
Finally, the delegates are, with few exceptions, people who have come to prominence since the war, who occupy key economic posts at home, and who are cognizant of the need to create a new economic pattern in western Europe. If a real economic program is to develop in this area, it will have to come from leadership of their type.
II—In our judgment the draft charter and multilateral agreement create a satisfactory framework for the development of cooperative [Page 405] efforts and the administration of ERP aid on a group basis. If there is nothing in the document, transmitted Rece 42,1 which binds the participating countries to full cooperative action if they consider their national sovereignties dictate otherwise or by which the participating countries have committed themselves to an integrated economic program, there are, on the other hand, no provisions which make the attainment of these objectives impossible and, in fact, the way is opened for their attainment. As the Swedish delegate is reported to have stated to the working group in its closing session:
“We are not attempting to establish limits on the functions the organization might perform. We are trying to find points of departure from which its work may begin.”
III—Although the foregoing aspects of situation are encouraging, they do not serve to remove certain grave doubts in our minds concerning the probabilities for prompt and effective economic cooperation and integration in western Europe.
It was possible last summer to envisage a development under which these European peoples would gradually become accustomed to working together, with an evolutionary trend towards economic unification. Subsequent political developments and the growing demand in Congress and among the American people for quick results in this field lead to the conclusion that the CEEC cooperative effort must be one of accelerated tempo and must show tangible results by the end of this calendar year.
Unfortunately, there are reasons to believe that policies of several of the participating governments must undergo basic adjustments if this objective is to be achieved. There follows our analysis of the basic policy decisions which, in our judgment, should be taken in the next several weeks if real progress in cooperative action is to be accomplished.
A. Organizational set-up of ERP.
We have suggested to working group that CEEC organization should play a major role in programming requirements on a collective basis (see Rece 21 and Cere 3)2 and they are keeping this in mind in planning their continuing organization. Nevertheless, some delegates have expressed to us privately their skepticism that things will not in practice work out along these lines. Reasons given:
- 1.
- Experience in lend-lease, post-war loan, et cetera, has established experience in carrying on negotiations on bilateral basis in Washington and tendency is to assume that this will be repeated.
- 2.
- Some countries are so convinced that Washington will be the focal point that they are contemplating concentrating key manpower there. Examples: Sir Oliver Franks appointment and Jean Monnet’s trip.3
- 3.
- Existence of separate ECA missions in individual countries will accelerate bilateral trend, with these US representatives tending identify themselves with country’s problems, rather than with overall European concept.
We feel that in order to counteract this tendency for negotiations with participating countries to gravitate to Washington even at this early stage, it is essential that our statements that heavy responsibility will be placed on CEEC organization be strengthened by more formal statement of policy in Washington by ECA as soon as possible. Such a statement might define responsibilities and functions as among (1) ECA, Washington, (2) special country missions and (3) US special representative to CEEC in such a way as to make clear heavy responsibility we expect CEEC to assume. We are of firm belief that unless major role in programming task is thrown upon continuing organization, that organization will fail to develop into the dynamic mechanism necessary to attract good men and to accomplish our objective of closer European integration and unification. If bilateral dealings are encouraged, the concept of a western European community will be seriously jeopardized.
B. Specific cooperative measures.
At present time, multilateral clearing, customs union study group and manpower group have only tenuous and ill-defined relationship with CEEC. We believe that, in interests of development comprehensive and interrelated program, all specialized phases of economic cooperation should be brought within CEEC framework, utilizing its secretariat and subject to policy Directives Council and Executive Committee.
Your telegraphic comments requested.
C. Importance of basic British trade and financial policy.
As we see it, British attitude will largely determine whether or not European economic integration will go beyond modest level of coordinated import programming and limited cooperative measures. Key CEEC countries, such as France and Italy, are moving towards a more liberal economy and de-control. Therefore, it seems increasingly important that efforts toward economic unification through progressive removal of trade and financial barriers among the group should be pressed, along with the coordination of investment programming. This [Page 407] will, of course, involve important adjustments in economic policies being followed by participating countries. Although we are not in position to judge what developments have occurred or will occur in normal course in British attitude, on the basis of past performance and in light of rather timid and unimaginative approach evidenced during early days of present conference, it seems to us probable that some basic change will have to be pressed upon British. Some of their neighboring countries have pointed out that the free-trade area provisions growing out of the Havana Conference offer a device for the UK to enter fully into European economic cooperation and still to maintain their empire trade relationships, but their attitude at the present meeting toward the customs union article indicates that they still have not made basic decisions on this point. In the absence of British participation and leadership, it is unlikely that enough other European countries can be brought together to create a unit of efficient economic dimensions.
We suggest that this problem be exhaustively explored at the earliest possible moment. If it is decided that economic unification is not a requisite, it may be desirable to inform Congressional leaders at an early date that actual progress in European economic cooperation will prove to be very modest. If, on the contrary, it is decided that unification is a “must”, the first step to be taken would be US–UK discussions at a high level. From a purely economic standpoint, the need for an early decision on this question is clear. If it is known that at some future date there will be a large single economic unit in Europe, investment under the European Recovery Program will be based on that assumption re market and competition and will follow an entirely different pattern than under current conditions where the area is divided into 18 economic units.
D. The position of western Germany.
A number of delegates have emphasized the importance of western Germany in the recovery scheme. We concur in this view and are therefore concerned about possible position of bizone representatives to effect that it might be inadvisable for bizone to be represented on Executive Committee because this would involve the bizone more deeply in the CEEC program than they wished to go at this moment; that at the moment the other CEEC countries want more from western Germany than Germany wants from its European neighbors; and that recovery has been slower in western Germany than elsewhere in Europe. (We are not urging and have not urged that bizone be on Executive Committee, but mention this by way of example.)
We believe, however, for both psychological and economic reasons, [Page 408] that western Germany should participate in this program in the same manner and in the same spirit as other members of the CEEC group.
If this assumption is correct, a fuller exploration of this subject between Washington and the occupation authorities might serve a useful purpose.
One immediate step which the bizone could take would be full participation in the customs union study group. Furthermore, it is believed that the bizone authorities will come to view an integrated program more sympathetically as it becomes clear that this will increase intra-European trade.
Sent Department 1633, repeated London 220.