The Ambassador in France (Bruce) to the Acting Secretary of State
4001. The following are the impressions which Harriman and I received from the extended conferences with the French yesterday as outlined in McCloy’s telegram (Embtel 39961) which merely gave, the high points at 1 a. m. this morning after meeting.
Harriman and I are in complete agreement with McCloy that it is entirely inappropriate and impracticable for the French to couple as a condition precedent the full solution immediately of the problem of disparity between export and domestic price of German coal in connection with their agreement to mark devaluation. I think the French position, however, has more substance to it than merely the delicate political situation in France.
It is manifestly very difficult for any French Government to accept a situation, following the wave of devaluation set off by the British pound, in which Germany would emerge in a more favorable competitive position than before vis-à-vis the other Western European countries.
If the domestic price of coal in Germany is permitted to follow the devaluation while the export price is maintained for export, it is difficult to contest the French thesis that the German position in this important commodity will be more favorable than before devaluation with an important effect on the price structure of the Western European metallurgical industry.[Page 466]
We are inclined to agree with the French that a development of this nature would constitute a serious set-back to the aim of European integration and liberalization of commercial exchanges which it is firm American policy to encourage.
The texts of the drafts given in McCloy’s cable were tentatively agreed by both sides last night but there remains the French strong insistence that during the period while these studies and measures would be undertaken that the existing disparity between the domestic and export price of German coal should be maintained at existing levels and not be increased by the effect of devaluation on the German domestic price.
The present difficulty over the devaluation of the German mark is, of course, merely a part of the more fundamental problem of reconciling the various nationalist differences in Europe in the interest of achieving greater unification. We recognize the extraordinary difficulties in reconciling these conflicting interests without appearing unduly to favor one country or the other to the detriment of greater European cooperation.
Mr. McCloy’s visit was very helpful to all concerned.
I have endeavored to persuade the French not to invoke the appeal machinery even in the event of the failure to agree on all points.
I am seeing Queuille this morning and will report in a subsequent telegram later developments.
Repeated Frankfort for McCloy 68, London for Holmes 661.