Foreign Relations of the United States, 1949, Council of Foreign Ministers; Germany and Austria, Volume III

740.00119 Control (Germany)/1–649

Memorandum by Mr. Wayne G. Jackson, Special Assistant to the Director of the Office of European Affairs (Hickerson) to Mr. Hickerson

secret

[Washington,] January 6, 1949.

Introduction.

One point which emerged very clearly during the London negotiations on the Ruhr Authority Agreement¹ was the impossibility of separating the various aspects of our policy and operations in Germany into water-tight compartments. The Report of last June’s London talks² specifically makes the point that the matters covered are all interrelated and should be approved or disapproved as a unit. This position was and still is sound. While I believe that the Ruhr Agreement as drafted is as satisfactory as could be obtained now and that we should eventually approve it, I do feel that we need not hurry. It should be examined as part of a package which is satisfactory not only as to the whole but as to the constituent parts. I feel we should at least wait until the French have approved the Agreement. The British, because of the Parliamentary recess, will not approve the Ruhr Agreement before about February 10 at the earliest. I do not know the exact French time-table but they intend to have an Assembly debate on the Agreement and a vote of confidence before they sign. Accordingly, there is no particular rush as far as we are concerned.

In order to amplify the point about interrelation it might be useful if I mentioned some of the other German problems which came up in the course of our discussions. There is no particular significance to the order in which these are listed below.

Specific Problems.

1. Prohibited and Limited Industries.³

This came up in connection with the allocation functions of the Authority and the proposals for supervision over management as they applied to steel. It was obvious that both the level of steel production and the type of steel production within the present permitted level were of great importance. The French and Benelux countries want a permanent limit on steel production in Germany. While the British position was not stated with any clarity, they did not dissent from the French and Benelux statements nor did they give any support to the unequivocal statement of Ambassador Douglas that the U.S. did not favor a permanent ceiling on steel production in Western Germany.

The argumentation in favor of a limit on production was in terms of security. It is obvious that the French, in particular, are anxious to have a defense in depth against rearmament in Germany. Accordingly, they want not only prohibitions upon the manufacture of certain types of end products but also they want a limitation upon the amount of steel which may be produced so that there will not be extra steel which could be used for armament purposes. They fear that if productive capacity remains in Germany in excess of an agreed limit of production, this capacity will in fact be used or, at least, will constitute a continuing basis for German efforts to increase the level of production. As a part of this defense in depth, they were most anxious to give the Ruhr Authority extensive powers of supervision over production, development and investment in the steel industry so that they could forestall developments which might result in increases in production or the installation of equipment which could be justified only in terms of the manufacture of prohibited items.

There is undoubtedly a considerable commercial motive on the part of the French and Benelux and perhaps the British. The various plans for steel production expansion in those countries give rise to fears that the time may come when more steel is produced than can be economically marketed. Accordingly, there is a great attraction in using the security arguments as a means for eliminating potential competition from a steel producer who probably could operate with lower costs and more efficiently. While this commercial motive is involved, these same considerations also have their security aspect. If the center of gravity of continental European steel industry were moved westward from the Ruhr and into France, Belgium, et al., there would, of course, be a shift in the center of gravity of military potential. I doubt seriously whether a commercial motive would account for any substantial part of the popular support which undoubtedly exists in the Western European countries for minimizing the importance of the Ruhr steel industry.

If and when agreement is reached with respect to limitations and prohibitions upon German industry, it then will be easier to determine what methods would be most appropriate for ensuring that those limitations and prohibitions are respected. The role, if any, of the Ruhr Authority in this field could be more accurately determined. If, as I imagine, some of the prohibited and limited items require for their manufacture special types of steel-making equipment, a technical study of the problems involved in enforcement might well lead to the conclusion that a body like the Ruhr Authority, which will be in close contact with the Ruhr steel industry, would have a useful function in watching the investment and development plans of the steel industry so as to be able to foresee prospective violations of limitations and prohibitions. This would in turn affect the way the staff of the Authority is organized. That organization is to take place as soon as the Agreement is signed. Until a definitive position is agreed on the question of prohibitions and limitations and a method for policing the Agreement has been worked out, we may expect the French and Benelux and perhaps the British to keep pressing at every opportunity for general powers of control over German industry.

As a footnote to this problem I might mention that one of the most hard-fought issues in the Ruhr talks was the question of whether the Authority should have the power to allocate pig iron for export. Aside from a somewhat nebulous desire of the Dutch to be sure in the future of adequate supplies of pig iron, it was clear that the desire of the French and Benelux Delegations to include pig iron was principally based upon their wish to be able to limit the amount of pig iron available to the German economy and thus further protect the limitation on steel production, if not control the level of steel.

2. Reparations and Dismantling.⁴

This problem arose really as part of the matters discussed in the previous section. There was obviously a strong desire on the part of all the other delegations that the dismantling program go forward promptly and that any productive capacity which was unnecessary in view of prohibitions and limitations upon German industry should be removed. While they undoubtedly want to obtain equipment out of Germany, I believe that the principal motivation is again to limit the productive capacity in prohibited and limited industries so as to ensure that the prohibitions and limitations will not be violated. To the extent that physical removals of equipment minimize German ability to exceed limitations and prohibitions, the pressure from the Western European countries for the transfer to the Ruhr Authority of controls over German production would lessen.

3. Relation of Steel Production in Germany to Rearmament.

The Brussels Pact countries anticipate a considerable degree of rearmament in connection with the projected North Atlantic Pact.⁵ They would like, of course, to have the materials for rearmament given to them from U.S. sources without reducing the amount of ERP aid and without having to divert their own production from civilian and trade purposes. In particular, they would not like to see German steel production increased as a result of such a program. It is doubtful whether, under any circumstances, all these wishes can be met. If in fact European steel in large quantities will be used in an armament program, it will either mean that the Western countries will devote their own steel production to domestic use, having none for export and thus leaving the commercial market open for German steel exports, or else German steel production would be used in part as the basis for armaments, leaving the other countries with exportable surpluses. Both of these alternatives worry the Western countries very much. It seems essential that the relationship of the armament program to ERP and to the level of German steel production be thought through and some sort of accommodation reached.

4. The Occupation Statute.⁶

This matter came up at various times and in various contexts. Since the Ruhr Agreement anticipates that powers now exercised by the Military Governors may from time to time be relinquished to a provisional German government, it was a matter of considerable interest to the delegations to know what residual powers would be retained by the Occupation Powers. While they are not worried that the provisional government will refuse to carry out the decisions of the Authority during the Control Period, there is, I believe, some latent fear that, by turning powers over to the German government, the Occupation Authorities may find themselves unable to ensure that decisions of the Authority are carried out. This fear arises in part from a general doubt as to whether the Military Governors and particularly the U.S. Military Governor will really try to make the Ruhr Authority a genuinely functioning body during the Control Period.

The question of arrangements under the occupation statute also came up in connection with the many occasions in the draft Ruhr Agreement where provision is made for decisions to be taken by the Occupation Powers. How would agreement be reached between the various Military Governors? Would unanimity be required or majority vote or would there be a special voting formula as exists in JEIA? Since, from the very beginning, decisions will have to be made jointly by the Occupation Authorities in relation to the Ruhr Authority, this matter needs to be settled.

5. German Constitution.⁷

This matter came up in connection with the problem of the implementation of the Ruhr Authority’s actions after the Control Period. While it was agreed generally that the relations of the Authority should be with the central German government, the question was raised as to whether that central government would have the power to require Land or other political units to take required action. For example, the Agreement provides that the Authority may examine witnesses and conduct investigations. The power of subpoena might well rest in the judicial system at the Land or lower level. Some feeling was expressed that the central German government might disclaim any ability to implement the actions of the Authority by reason of the constitutional setup in Germany. While the implication of the concern described above is that the French and Benelux countries would favor a central government with strong powers, this is obviously not what they seek.

The question of the powers of the central government was, of course, high-lighted by the very serious French and Benelux concern over the possibility of the nationalization of the coal and steel industries by a central German government. As Schuman pointed out in his meeting with the Secretary, such action would put into the hands of a central government an immense economic power and one which would in fact, if not in theory, come close to changing the concept of a federal government which was agreed in London last spring. The present British Government is, of course, almost hysterical on this question of nationalization and found the most extraordinary difficulties with various drafting suggestions in the Ruhr Agreement because they might by some stretch of the imagination be construed to prejudice the possibility of such nationalization.

It is clear, I believe, that this possibility of nationalization of the coal and steel industries by a central German government will continue to cause difficulties. This possibility plus the need of the central government to have considerable powers in order to implement the functions of the Ruhr Authority, will cause the French and Benelux countries to make every effort to strengthen the outside controls on the coal and steel industries.

6. Military Security Board.⁸

The London Agreements of last spring provided for the setting up of a Military Security Board during the Occupation Period. This appeared to be the principal agency to be charged with maintaining disarmament and demilitarization in Germany, including the policing of prohibitions and limitations upon German industries. As soon as the security problem was raised in the Ruhr discussions, it became evident that unless some other body was charged with the principal security functions, there would be the strongest kind of pressure to give security functions to the Ruhr Authority. In view of the role envisaged for the Military Security Board by the London Agreements, and the undertaking in Annex L of the London Agreements that adequate provision would be made in the post-occupation period for demilitarization and disarmament, it became necessary to stress that the Military Security Board and its successor would be the proper repository of security functions.

As will be recalled, the U.S. Delegation’s suggestion as to how we could meet the French demand for powers of supervision over management was to propose that the Ruhr Authority should, in substance, act as an agent of the Military Security Board in the security field as applied to the Ruhr industries. The British proposal was very much the same. As it turned out it was not necessary to be specific, although the draft Ruhr Agreement clearly anticipates that the Military Security Board and its successor will have the principal security functions in Germany.

While the basic terms of reference of the Security Board have been agreed in principle between the three Military Governors, the Board is to operate only during the occupation period and there is no express agreement about a successor. Furthermore, the actual method of operation of the Board and the fields in which it will act are not yet developed. The reference in the Ruhr Communiqué to the adaptation of the Byrnes’ proposals, which was included on the Department’s instructions, clearly indicates that the techniques for ensuring the continuance of disarmament in Germany will be further developed as time goes on.

When the time comes to determine, under Articles 18 and 19 of the Ruhr Agreement, what powers now exercised by the Occupation Authorities should be transferred to some other body, there will be very strong pressure to transfer many powers to the Ruhr Authority unless the Military Security Board has been fully set up, its powers defined and some measure of agreement has been attained as to the continuance of those powers in the post-occupation period.

There is a further point with regard to the Military Security Board which also applies to any other body set up in Germany. The Benelux countries asked whether they would be associated with the working out of any successor to the Military Security Board (on which, of course, they are not represented). On the Department’s instructions, we advised them that in our view they should be associated with the working out of such arrangements even though we could not make any commitments as to their membership on any body. They later expanded their request to seek assurance that they would be associated with the setting up of any organizations dealing with Germany. Since they will be members of the Ruhr Authority, unless we can give them some assurance as to their participation on a general basis in arrangements relating to Germany, their desire will be to transfer as many powers as possible to the Ruhr Authority itself.

If a successor to the Military Security Board is in fact to be the body which will police limitations and prohibitions on German industry, it may well be that the Ruhr Authority could play a useful role as an adjunct of that successor with respect to the Ruhr industries. If such a development is to be anticipated, it would seem desirable to foresee it now and to give thought as to the best method of working out the relationship.

7. Fusion Agreements.⁹

It is evident that the British are restive under the interpretation which U.S. Military Government is giving to the provisions of the Bizonal Fusion Agreement relating to the voting procedure in JEIA. In substance this provision is interpreted as giving the U.S. the controlling voice in all matters which affect foreign trade or the German balance of payments position. The British resistance to this broad interpretation was made clear in the discussions about the procedure to be followed by the Occupation Authorities in casting the German vote in the Ruhr Authority. The British refused to agree to our position that the casting of the German vote should be determined in accordance with the JEIA formula whenever the subject matter of the vote fell within the JEIA provisions of the Fusion Agreement. The British Delegation formally stated the British reservation of the right to take this matter up on an inter-governmental basis.

While this matter of the predominant U.S. voice was not discussed in any detail with the French, it will come up in connection with the working out of any trizonal fusion agreement and may well prove very difficult. We will, of course, have no support from the British in our attempts to have a dominant voice with respect to the French Zone. I think it highly likely that the negotiations with the French for a trizonal fusion agreement, which will presumably involve the British at the same time, will require a consideration of many phases of our occupation policy in Germany. The example we have established of insisting that our financial contribution gives us a predominant voice in a wide range of matters within Germany will make the French anxious to define their rights with considerable clarity and will make them wary of broad formulae.

The recent letter that Mr. Bevin wrote to Ambassador Douglas relating to the long-term program submitted to OEEC by the Bizone¹⁰ indicates that although we are successful in maintaining that the U.S. voice is predominant within Germany, we will not be successful in preventing attacks in OEEC by the British and presumably by the French on the economic policies and programs which we put into effect through our dominant position. Aside from the unhappy spectacle of the three Western Occupation Powers squabbling in OEEC over German policy, the question is raised as to whether the British criticism of the long-term Bizonal program may not arise out of a legitimate belief that this program is not designed to further the recovery of Western Europe as a whole but is rather designed to further the interests of Germany alone. I seriously doubt whether Mr. Bevin would have written so strong a letter if it were not the British view that the Bizonal program as submitted is detrimental to British interests and probably to European interests as a whole. If there is any validity in this surmise, it would seem most appropriate to examine the question of whether through our exercise of dominance in Western Germany we are not promoting action which is inconsistent with the objectives which we are seeking with respect to the whole OEEC area.

This problem is again related to the proposal recently made by General Clay that there be no further appropriations to the Army Department for Civil Affairs in Germany but that the whole appropriation be made to ECA. This he felt might remove the necessity for the JEIA voting procedure.

8. Relation of Germany to OEEC.

Aside from the points mentioned above, the relationship of the Bizone to OEEC is already of a special nature. At the time when OEEC was making recommendations regarding the division of U.S. aid for the current year, it was generally felt that the Bizonal Area got considerably more than its fair share. The OMGUS people who took part in these negotiations were perfectly candid about saying that they had tried to get as much for Western Germany as possible, pointing out that other countries likewise did the best that they could for themselves; The fact that it was Americans who were making the claim on behalf of the Bizone, however, made our voices disproportionately loud. We are encouraging OEEC to develop into as much of a cooperative undertaking as is possible. It is at least questionable whether we are furthering this aim by having the one area in which we have a preponderant voice acting not for the purpose of developing cooperation but for the purpose of getting as much as it can.

The experience of the European countries with the economic policy of the Bizonal Area clearly makes them dubious as to whether the Ruhr Authority will be permitted to function in any real sense so long as the occupation continues and the American voice is predominant. The continuous insistence in the discussions last spring, and in the recent meeting, on the preservation of American rights under the Fusion Agreement have emphasized this doubt.

Conclusion.

The matters discussed above, in a rather confused way, bring out the fact that the whole range of U.S. problems in relation to the Occupation of Germany are closely linked together. The possibilities of inconsistencies or over-lapping functions are great, particularly since the several problems are being handled by different people, at different times and at different places. While I believe that the draft Ruhr Agreement fits in with present U.S. policies and with the foreseeable development of those policies, it seems to me that we should not take formal action to approve it until we are considerably more clear on several of the other points mentioned above. Some of these points require for their clarification internal action within the U.S. Government, principally a higher degree of coordination between the objectives of the occupation, the recovery program and other aspects of U.S. policy in Europe. A number of the problems, however, cannot be resolved by the U.S. alone but seem to require fairly exhaustive discussions with the French and British and perhaps also with the Benelux, countries. The French and Benelux countries want the Ruhr Agreement very much. Furthermore, they may be expected to press in other negotiations for the same measures of control over Germany as they tried to achieve in the Ruhr talks. In order to preserve our bargaining position and to ensure a consistent course of action, we must preserve the greatest possible flexibility.

I understand that thought is being given to holding a general meeting on German policy with the British and French at a not too distant date. I doubt whether any such meeting would be worth holding if it is proposed to discuss only general policies. I do believe, however, that such a meeting would be of great value if some of the specific points discussed above, and undoubtedly others, could be taken up and thrashed out with the British and French. I have no illusions that permanent answers to the above problems can be worked out in the course of the next few months.

Interim answers must, however, be found. If they are evolved through full and fair discussion with the British and French, it should be possible to obtain agreement that, at appropriate intervals, there would be a complete review of matters relating to Germany with the understanding that the work and organization of bodies like the Ruhr Authority would also be reviewed and that necessary changes would be made from time to time. I am convinced that the possibility of such changes is most desirable. Only by experience will we find the bugs in the various arrangements. I am also convinced that we cannot get agreement by other countries to a procedure which would allow for changes from time to time without instilling in them considerably more confidence than they now have in the reliability of our intentions and the consistency of our declared policies with the actions which we take in Germany. Unless they can be convinced that we not only have a consistent German policy but that we will carry it out, they will continue to grab all the controls they can get from time to time while at the same time remaining prey to every rumor or propaganda story which pictures the U.S. as more interested in German recovery than Western Europe as a whole.

1. For documentation relating to the negotiations for the establishment of an International Authority for the Ruhr, including the text of the draft Ruhr Agreement, see Foreign Relations, 1948, vol. ii, pp. 448 ff.
2. For documentation on the London Conference on Germany, February 23–March 6 and March 20–June 1, 1948, including the report of the Conference, see ibid., pp. 75 and 145.
3. For documentation relating to the question of prohibited and limited industries in Germany, see ibid., pp. 668 and 703. For documentation relating to the negotiation of the Prohibited and Restricted Industries Agreement in London, January–March 1949, see pp. 546 ff.
4. For documentation on the questions of reparations and dismantling, see Foreign Relations, 1948, vol. ii, pp. 703 ff; for further documentation relating to these questions in 1949, see pp. 546 ff.
5. Documentation relating to the negotiation and signing of the North Atlantic Pact is in volume iv .
6. For documentation on the preparation of a draft Occupation Statute by the Military Governors, including their report and the text of the draft statute, see Foreign Relations, 1948, vol. ii, chapter ii, part b . For documentation relating to the London negotiations of representatives of the United States, United Kingdom and France concerning the draft statute, January 17–April 2, 1949, see pp. 1 ff.
7. For documentation on the preparation of a constitution for West Germany by the Bonn Parliamentary Council, see Foreign Relations, 1948, vol. ii, chapter ii, part a . For further documentation relating to the deliberations of the Council in 1949, see pp. 187 ff.
8. For documentation relating to the establishment of the Military Security Board, see Foreign Relations, 1948, vol. ii, pp. 665 ff. For the text of the Directive on the Organization of the Military Security Board, January 17, 1949, see Germany 1947–1949, pp. 103–105.
9. For documentation relating to the problem of trizonal fusion, see Foreign Relations, 1948, vol. ii, pp. 669 ff.; for documentation relating to the London negotiations of representatives of the United States, United Kingdom, and France concerning the principles of trizonal fusion, January 17–April 2, 1949, see pp. 1 ff.
10. The letter under reference here, not printed, was transmitted in telegram CC 7204, December 27, from Berlin, in which Clay expressed his astonishment at the British position which reserved the right to approve Bizonia in the OEEC. (740.00119 Control (Germany)/12–2748)