740.00119 Control (Germany)/3–1149: Telegram

The Secretary of State to the Embassy in the United Kingdom


821. For Holmes. Fol is background present position re area in which US shld have predominant voice in exercise of reserve powers:

  • Various members of Cong Appropriations Comm. have repeatedly expressed strong conviction that while US is called upon to furnish principal financial support for West Ger, it shld have principal voice in economic policies which wld affect the extent of such drain on US. Revised Bizonal Fusion Agreement of Dec. 1947 did not fully meet [Page 51] their approval and resulted in difficulty in obtaining appropriation. To some extent their objections were overcome because Brit in practice largely recognized US right to decide matters affecting amt. of contribution required fr. US. It is only due to such acquiescence that arrangement has worked and been reasonably satisfactory to Cong. GARIOA and ECA appropriations for West Ger will, of course, be an absolute necessity for some time for success of new Ger Govt and of West. Allies’ policy for Ger. To obtain them, we must satisfy Cong that US retains necessary powers over Ger Govt to hold such costs to minimum. In order to satisfy Cong, this must be clearly stated in writing before Govt is set up because members will not be readily convinced Fr will fol above stated practice of Brit of acquiescing in a rather broad area of economic matters in which US exercises majority voice. For these reasons it is really in interests of Brit and Fr that US area of controlling voice is adequate to give Cong requisite reassurance to make necessary appropriations.
  • Development of Occupation Statute negots. showed clearly desires Fr to retain such large measure of reserved powers as to weaken Ger Govt. Powers reserved are accordingly now so extensive that only by a restrained use of them can the new Govt be made effective and be expected to assume real responsibility. Shld such Govt be weakened and subjected to hampering restrictions, heavy additional costs to US for food and assistance wld be inevitable.
  • You may desire express such part of above as in ur discretion it wld be proper to divulge to ur Brit and Fr colleagues to show importance of statement of principles. Perhaps some agreed minute indicating limited extent and purpose for which US proposes to use its predominant voice might be helpful in obtaining consent thereto. Clearly control of foreign trade and foreign exchange alone wld not give protection to US funds which Cong desires. For example, (a) possible failures of Gers in food collections wld either defeat policy for economic recovery or require more imports (b) internal pricing which might increase export costs and thus decrease exports, thereby increasing US financial burden. Army concurs.