Department of Defense Files
The Acting United States Military Governor for Germany (Hays) to the Department of the Army
CC 8599. From Wilkinson for Voorhees personal. At Quadripartite Trade Meeting 14 May, US representative stated that Russian position paper presented previous day (sent Army Dept 1 TT 22251) had raised several points of basic principle which went beyond his instructions and which he had therefore referred to this government. He expected to have additional instructions promptly. Russian representative took this calmly and said he was not pressing on his position paper but on the contrary had brought in a list of simple practical measures which would be agreed upon without delay. He then read following proposals:
“Having considered at meetings on 12th, 13th and 14th May, 19492 the statements made by the various sides on the question of the abolition of restrictions, the experts have come to the following agreement:
“1. To put into force again the incompletely implemented Berlin Agreement of November, 1947, on the exchange of goods between the Soviet Zone and the Anglo-American Zones, as well as other trade agreements the implementation of which was stopped by the introduction of restrictions.
“To permit amendments on [or?] alterations, to be agreed with the appropriate German organizations, in the description of categories of good provided for by this agreement.
- “2. The British and American authorities of Western Zones of Germany will immediately give instructions to German organizations and firms of the Western Zones to dispatch to the Soviet Zone equipment, finished goods, materials and goods which were being manufactured in accordance with the Berlin Agreements, and the manufacture of which has been completed.
- “3. The British and American authorities will immediately give instructions to the German organizations and firms of the Western Zones to start the production on such orders from the Soviet Zone the execution of which has not yet begun upon receipt of appropriate confirmation from the Soviet Zone.
- “4. The British and American authorities will take immediate measures for the return of all goods, freights and other material values belonging to the Soviet authorities and the Soviet Zone which were held up or blocked after 1st March 1948 owing to the introduction of restriction.
- “5. To re-establish the right of German firms in the Western Zones and in the Western sectors of Berlin to carry out commercial transactions within the framework of the Berlin Agreement of November, 1947, as well as other commercial transactions with firms in the Soviet [Page 767] Zone. Both parties to issue relevant instruction to the German trade organizations of their zones to start immediately the execution of trade agreements and to conclude new agreements and new transactions when necessary.
“6. Prior to the solution of the currency question by the Council of Foreign Ministers, settlements of accounts for goods between the Soviet Zone and the Western Zones will be affected by entries of sums due to the parties in a clearing account at prices provided for in former trade agreements and transactions, or altered by mutual consent. Final settlements will be effected after the Council of Foreign Ministers solves the currency question.
“The German Bank of Emission and the banks of the federal lands will immediately proceed to conclude a technical agreement on the clearing settlements, based on the above principles.
“Settlements between the Soviet Sector of Berlin and the Soviet Zone, and the Western sectors, including settlement for the supply of electric power, and other public utilities, must be carried out on the same basis but in separate clearing account. The clearing agreement to be concluded between the Berlin Municipal Office (Stadtkontor) and the central banks of the Western sectors of Berlin.
- “7. The parties will immediately issue instruction to start on the practical implementation of the present agreement.”
Then there followed considerable discussion of the precise meaning of the proposals, which led to the following amendments and addition being put forward by various representatives:
“1. To agree that the uncompleted portions of the Berlin Trade Agreement for 1948, the completion of which was interrupted, shall be brought into force again to the extent that the buyers in one or other area still wish to procure the items listed in that agreement.
“To permit amendments and alterations to be agreed between the appropriate German organizations in the description of categories of goods provided for by this agreement.
“To review and revise the coal and power agreement concluded between British and Soviet Military Governments on 1st December 1947. (It was agreed on this occasion that representatives of all three Western occupation authorities should participate in the making of the new agreement.)
- “2. The British and American authorities of the Western Zones of Germany will invite the German organizations and firms in the Western Zones to dispatch to the Soviet Zone equipment, finished goods, materials and goods which were being manufactured in accordance with Berlin and other agreements and the manufacture of which has been completed and which have been paid for, or which payment conditions have been agreed. The Soviet Zone authorities will take similar action.
- “3. The British, American and French authorities will invite the German economic authorities in Western Germany to give instructions to the German organizations and firms of the Western Zones which will enable them to start the carrying out of such orders from the Soviet Zone, the execution of which has not yet begun, upon receipt [Page 768] of appropriate confirmation from the Soviet Zone. The Soviet Zone authorities will take similar action.
- “4. The British, American and French authorities will take measures as rapidly as practicable for the release and dispatch of all goods in transit, and other material values belonging to Soviet Union and the Soviet Zone which were held up or blocked after 1st March 1948 owing to the introduction of restrictions. The Soviet Zone authorities will take similar action in the Soviet Zone. This does not refer to reparations but includes restitution.
- “5. To re-establish the right of German firms in both areas to carry out commercial transactions within the framework of the Berlin Agreement of November 1947 as well as other commercial transactions with firms in both areas. Both parties to issue relevant instructions to the German trade organizations of their zones to start immediately the execution of trade agreements and to conclude new agreements and new transactions when necessary.
“6. Either to accept the Soviet wording if approved by the financial advisers of the western military governors or to substitute the following:
“The German organizations will be asked to make proposals for the establishment of satisfactory clearing arrangements to take account of the present position of two currencies and in order to facilitate payments arrangements between the two currency areas.”
- “7. No change.
- “8. References to the Berlin Agreement for 1948 apply only to the United States, Soviet and British Zones of Occupation, the French Zone not having been a party to that agreement.”
While everyone indicated these amendments might be desirable as elucidations, no one accepted the Russian proposals, even by implication. British representative (Chairman) expressed view, which was generally shared, that progress could be made along above line, and at his suggestion it was agreed that meeting would reconvene at 1100 hours 18 May for further discussions, at which time it could be expected the U.S. representative would have had his new instructions.
Russian stated he was particularly interested in certain specific items on 48 Trade Agreement:
- Metal rolling equipment, castings and manufactured steel, 30 orders valued at 77 million marks;
- Organic dyestuffs, 4 million;
- Rubber goods, value not specified but with specific reference to tires and conveyor belting. Also anxious to reinstate hard coal-brown coal exchange.
British representative offered, pending next meeting, to urge the Germans to expedite deliveries to Soviet Zone of any items on order insofar as there are no payment difficulties still to be settled between the contracting parties. Instruction to this effect are being issued to all Laender of Bizone.[Page 769]
Of Russian proposals we take particular exception to clearing account. Which would in effect mean Bizone financing Soviet Zone purchases. We expect payment to be on a strictly buyer-seller basis with no clearing until CFM work out currency problem.
Believe you can see from foregoing how very upsetting it would be for us to flatly introduce 1A and 1B restrictions into this situation it would result in freezing of at least some goods which have already been paid for. Recommend you consider effectively suspending 1A and 1B application to goods already on order and to quantities of goods which are listed on old 1948 Trade Agreement. Thereafter we can less obviously, but probably not without notice being taken, see that 1A goods do not get on any new trade agreement and that new orders are in some way screened to kill 1A or large 1B items. But for the present we reiterate that imposition these restrictions can have most serious repercussions and since quantities of 1A or 1B items likely to move are insignificant we hope you will see your way to avoid their imposition now, just as CFM gets underway.