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

840.50 Recovery/4–848: Telegram

The Acting Secretary of State to the Embassy in France

secret

Washington, April 8, 1948—5 p. m.

1146. Cere 10. From Lovett. Following your Rece 44¹ and other developments there has been considerable discussion of relationship of CEEC organization to larger objectives ERP. Following general principles have emerged and have been discussed with Administrator² and his close advisers who agree in principle particularly re paras 4 and 5 below. They approve sending message along following lines.

1. ERP is one aspect of larger objective of strengthening Western Eur community. Our support of Brussels Pact³ is another. Western Eur community cannot realize its potential strength in political, economic or military spheres without much closer cohesion and integration than has existed in past. In economic field this integration calls for progressive reduction of impediments to free flow of goods and persons within community, tending toward eventual elimination of all internal trade barriers within community, as stated in policy declarations ECA Act, and for restoration of financial stability with objective of achieving full convertibility of currencies and such stable economic conditions that financial difficulties will not impede movement of goods and persons.

2. Present political, economic and military situation offers opportunity for achieving above objectives which may not occur again. Passage of ECA Act provides potent lever for furthering attainment of these objectives and CEEC organization provides focal point around which closer Western Eur economic cohesion can be built.

3. Full potentialities of CEEC organization can be realized only if it (a) is in fact given important functions to perform; (b) has effective organizational structure; and (c) has first-class personnel. These three factors are interrelated, (a) While many functions which could be assigned to it depend on action by participating countries, role which the US assigns to organization will be very influential if not decisive in determining its development. (b) Effective organization cannot be determined in vacuum but only in relationship to functions to be performed, (c) Only if there are important functions and adequate organizational structure will it be possible to ensure that high-caliber personnel is available.

4. While basic responsibility and decision re US ERP aid must rest with Administrator in Wash, it is believed he should rely as much as possible on his reps abroad. If we do not assign to US staff overseas and to organization significant role in connection with US ERP aid and if US should concentrate too many operations of US component of Recovery Program in Wash, it is most unlikely that Eur countries will in fact assign any important functions to organization and highly doubtful whether high-caliber personnel would work with it. The concentration in Wash of the most important work in relationship to application of US aid would virtually ensure that participating countries would establish strong missions here to press their individual claims under eighteen competing supply programs, that concept of joint program would be lost in process and larger objective of furthering maximum Eur initiative, mutual aid, cooperation and higher degree of integration in Eur would be defeated.

5. Accordingly objectives US policy indicate that large proportion of the functions of making recommendations about programs and evaluating them in terms of economic revival of Western Eur should be performed by Eur countries and US staff in Europe. Would be most unfortunate to allow competitive lobbies for the Eur countries to grow up in Wash.

6. All programs for US aid have, of course, to be decided and approved by Administrator in Wash. Preliminary framing of country programs of recovery and coordinating them into joint program, as contemplated in Act, to be recommended to Administrator should take place abroad. Fact that first quarter program (Apr–June) is necessarily being almost entirely drawn up in Wash should not be construed as a precedent. An attempt should be made to perform more functions with respect to second quarter (July–Sept) in Eur with an ever increasing shift of functions to field. It is not believed that CEEC organization itself should actually try in the first instance to prepare and recommend programs for participating countries. Its aim should rather be to develop procedure and practice by which organization brings together programs developed in first instance in and by participating countries, in consultation with ECA missions, endeavors to iron out inconsistencies, relates requirements to availabilities, points out potential spheres of mutual aid, suggests cases in which off-shore procurement by US in a participating country can further greater interchange of goods between participating countries and makes recommendations with respect to programs to countries and to Administrator which are designed to achieve the purposes of CEEC agreement and Act and to integrate proposed actions of various participating countries. Such recommendations would relate not only to US aid components of programs but to other aspects. This action would, as stated, start with country programs developed in various countries in consultation with ECA missions stationed there. Coordinating job or organization would be done in consultation with US Special Rep and his staff. Resultant programs and recommendations would, therefore, from point of view of Administrator, have been developed at all stages in full consultation with his reps. It would be important for ECA missions to keep in mind always concept of joint programming and operate with and through Special Rep whenever possible and avoid becoming competing claimants before Administrator.

7. Most difficult problem relates to division of ERP funds between various countries. It is not believed possible or desirable at the outset to ask organization to recommend to Administrator on division of US funds. There are many difficulties for participating countries and many US interests which Administrator will have to take into account. Nevertheless if it becomes possible to decrease or overcome these difficulties as European recovery develops, maximum recommendatory role even in this area should be given organization in order further to strengthen its position. Following procedure appears to avoid these difficulties in early stages:

(a) First quarter program has, of necessity, been drawn up in Washington (see 6 above).

(b) Countries should prepare specific obligations programs for second quarter ERP year (July–Sept) which would be submitted organization for comment though it may not be able to contribute much due to short time available. Practice of submitting quarterly programs to organization should be established as soon as possible however.

(c) Third quarter (Oct–Dec) programs should be given continuing organization for general review and recommendations as envisaged in 6 above. This quarterly program might well be reviewable against first ERP year shipments program (see (d) below).

(d) Participating countries prepare soonest shipments programs for first ERP year (Apr 1948–Apr 1949) which would be submitted to organization for recommendations as described para 6 above. US ECA missions and Spec Rep will be set up as soon as possible. As general basis for division US funds, both countries and organization would use figures being submitted to Congress in justifying first year’s appropriation. This justification is not in terms of shipments but in terms of obligation of funds. Therefore a shipments program for same period could and presumably would vary somewhat from appropriations figures while following general pattern. This would provide flexibility for CEEC recommendations.

(e) As soon as possible organization should start machinery going for achieving a preliminary shipments program for year Apr 1949–Apr 1950 (or perhaps for 15 months Apr 1949–June 1950 so as to make ERP year conform to US fiscal). This should be done not in terms of any predetermined amount of US aid or division of appropriations but in terms of what will be needed for recovery and in consultation with US ECA missions and Spec Rep. Such program could serve, as did first CEEC Report, as a preliminary program useful to US Exec in seeking second year’s appropriations. A more definitive program for that year would have to be worked out by countries and with organization in light of Congressional appropriations action in spring of 1949.

8. Organizational set-up proposed in draft CEEC agreement appears to provide an adequate basis for carrying through necessary functions if manned with good personnel. There appears to be no structural impediment to its developing into strong and effective organization.

9. Assigning of high-caliber personnel both to secretariat and to Council and its committee is of major importance. Presumably Council will meet rarely and it seems desirable to keep representation, at least nominally, on ForMin level. Thus if ForMins themselves could not attend, they would send high-level alternates. Exec Comm is of particular importance and should consist of first-rate men. It is our view that Exec Comm should consist of principal economic ministers of countries concerned, and that in those cases where it is really impossible for them to attend meetings of Exec Comm they should be represented by the men who, at official level are responsible for ERP matters within their respective governments.

10. Difficulties of Brit in reconciling their positions as Eur country and as center of Commonwealth are recognized and seem inescapable. The special position they held in relation to Combined Boards allowed them great freedom of action and flexibility. Other Eur countries during much of that period were occupied by Germans or allied troops and not in same relative position as now. The special wartime position for Brit now would be inconsistent with concept of Western Eur integration and other objectives of ERP. It is believed that above proposals constitute framework within which Brit could support CEEC in reality and yet retain freedom of action for their non-Eur interests.

11. Above proposals also seem to allow necessary protection against discrimination against Western Ger and against prejudice to US position there.⁴

Sent Paris, rptd London for Amb Douglas.

Lovett

1. Telegram 1633 from Paris, March 28, 1948, p. 404.
2. Paul Hoffman.
3. For documentation concerning the United States interest in the Brussels Pact and Western European Union, see pp. 1 ff.
4. This instruction drafted by Mr. Jackson of EUR: approved in draft by Messrs. Hickerson and Jackson for EUR, Henderson and Robertson for NEA, Wood for E, and Nitze and Stillwell for ERPC; was discussed in draft by Messrs. Nitze and Bonesteel with ECA Administrator Hoffman.