862.5151/9–2749: Telegram

The Ambassador in France ( Bruce ) to the Acting Secretary of State

top secret    niact

3996. For Secretary, Under Secretary and ECA Foster from McCloy.

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After all-day session at Quai d’Orsay at which Queuille and Petsche were present for long period, the French position was fully explored with the result that we were unable to reach an agreement that I could take back to Bonn tonight. French endeavoring to get a precise commitment simultaneous with fixing rate that parity between domestic and export prices would be reached by action of the Commission not later than January 1, 1950.

Existing disparity between German domestic price and export price of coal should not in meantime be accentuated as result of German and French devaluation, preferably by quoting export price in deutschmarks with understanding that any increase or decrease in deutschmark domestic price should be reflected in export price. Think this freezing of disparity might be accomplished for period from now to January 1, 1950 through possible use along approved lines of German ECA counterpart funds through releasing other budgetary funds for alleviation of higher import price e.g. for wheat, but no one here has been able to evolve method of meeting this situation after January 1, 1950 which is date by which French insist all subsidies in Germany must end, except in demonstrably exceptional cases.

I feel that effort to remedy consequences of new German mark rate before we have knowledge of what conditions will be as a result of revaluation is unwise and impractical. I was prepared to enter into general commitments to institute immediate study of the entire program, but pressed for the immediate establishment of a mark rate at 20 percent reduction feel that further delays in fixing 20 percent rate for Germany disastrous and even though we cannot obtain French agreement believe majority of Commission should proceed to the establishment of a 20 percent mark rate and immediately also vote to institute study referred to.

If French appeal believe the consequences in Germany will be most unfortunate, if not disastrous, but believe there is no alternative.

Every indication is that the French political situation is nervous in the extreme and this deeply motivates the attitude of the French.

Leaving for Bonn in early morning, due to arrive there for meeting with Commission 10 o’clock Bonn time.

Following is tentative text of proposed undertaking by High Commission:

“1. The High Commission recognizes that all discriminatory practices and dumping must be ended and measures must be taken looking toward the elimination of all subsidies, direct or indirect. This should be accomplished by January 1, 1950.

The Commission has ordered that an inquiry be undertaken immediately to determine the measures required to implement that policy.”

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Following is tentative text proposed by French of undertaking by US High Commissioner unilaterally:

“2. The US High Commissioner recognizes that, subject to such exceptional measures as can be justified, the maintenance of disparities between domestic and export prices of coal and other basic materials constitutes a discriminatory practice as the term is used in the decision of the High Commission made on September blank, 1949.”

Both texts are now in abeyance but would be helpful have your views as to wisdom of entering into such undertakings. Proposed text one would be announced shortly after fixing rate for mark and text two would not be published at all but would be disclosed to British and probably also to Germans.

Sent Department 3996; repeated London 660 for Holmes, Frankfort 67 for High Commission, Bonn 1.