Foreign Relations of the United States, 1949, Western Europe, Volume IV

ECA Telegram Files, FRC Acc. No. 53A278, Paris Repto: Telegram

The Acting United States Special Representative in Europe (Foster) to the Administrator for Economic Cooperation (Hoffman)

confidential

Paris, April 29, 1949—9 p. m.

u.s. urgent

Repto 3920. Further to our Repto 3810.¹

1. (a) Payments Committee reconvened April 26 for discussion referred to paragraph 5 Repto 3810.² Chairman Ansiaux opened with long review of existing agreement, burden of which was substantially as in paragraph 2 Repto 3810.³

(b) His statement of advantages of present system proved especially significant, in view of extent to which it was echoed in subsequent statements of various delegations. Among advantages he cited were (1) has maintained or even created unhoped for level trade in Europe; (2) treatment of conditional aid prevented uncertainty which would have interfered with execution coordinated programs by participating countries; (3) maintained European trade in traditional pattern (in discussing this point, he said that free competition cannot be truly effective until all other conditions are equal and would risk distorting basic pattern).

2. He said following objectives should be borne in mind during present negotiations: (1) sound expansion of trade in Europe consistent with reduction of dollar deficit; (2) progressive development of mechanism independent of American aid (closely related is harmonization of bilateral payments agreements, which would tend to facilitate functioning of compensations and prepare for future multilateralization of payments); (3) greatest possible adjustment of commercial policies toward freedom of purchase on basis of price competition and other market considerations, and less rigidity in the division of US aid.

3. He concluded with a statement of four topics which constituted the most fruitful area in which the committee could work in devising a new agreement: (1) new incentives; (2) flexibility of drawing rights (citing possibility of transferability between debtors as well as between creditors); (3) gross vs. net system and bilateral vs. multilateral; (4) fate of unused drawing rights (Article 24 unjust in some cases and not in accord with reality).

4. The British led off with praise for Ansiaux’s “masterly summary”. UK statement stressed importance of retaining known advantages of present scheme in seeking improvement.

5. The Swiss expressed concern at reluctance of committee to move toward multilateralization, stated favorable results attributed by Ansiaux to payments agreement were in fact results of American aid, and advocated ECA aide-mémoire as basis for consideration of new agreement.

6. Replying to Swiss, Ansiaux said he thought he spoke for the committee in thanking ECA for its clear expression, but did not suppose ECA wished to abandon its practice of leaving OEEC to decide on preference. He proposed that committee develop own principles first and then see if they fit ECA objectives.

7. Bizone stressed importance restoring competition and showing sufficient progress in other directions to insure continuance of aid. France stressed fear that ECA proposals would reduce intra-European trade and pointed out that council principle three requiring substitution non-dollar sources where products obtainable implies maintenance intra-European trade. Also ECA proposals would impose too great uncertainty re dollar aid on creditors who would reduce imports from Oboe PC’s,⁴ particularly of non-essentials. Sweden, Denmark, Portugal thought discussions should be based on present agreement in an effort to improve it rather than introduce an essentially new system. Netherlands saw danger of diminishing trade but while advocating caution, thought the risk should not be feared, pointing out that their delegation had always favored advance toward multilateralization. Italy was inclined to support the chairman’s statement but reserved their position. Greece thought new agreement should provide assurance to debtors of ability to execute their imports program. Austria and Norway interested in ECA proposals but did not take position, Norway expressing “some fear of going too far”. Turkey made no statement.

8. ECA observer then made statement to following effect: ECA did not wish improve any system; thus aide-mémoire did not refer to mechanics. However ECA had responsibility re best use dollars achieve objectives for which OEEC requested aid, and which give promise progress toward multilateralization trade and towards free convertibility of currencies. Therefore had submitted aide-mémoire to make committee aware of objectives which must be accomplished to justify use dollars for intra-European trade. ECA position rests upon concern for matters far broader than operation intra-European payments agreement. ECA strongly of opinion that there must be unrelaxing drive toward achievement conditions trade and production which must prevail in 1952 if viability to be attained. Such conditions include competitive structures and multilateral payments system. Must also be movement away from present rigidities bilateral trade arrangements. Reminded members of multilateral principles subscribed to by many of the PC’s as well as US in ITO, GATT and IMF. Committee should be aware therefore that ECA cannot finance any payments scheme that does not show radical improvement over present agreement in terms of real and effect[ive?] transferability of drawing rights. Regarding points raised by delegations, stated that emphasis should be on sound rather than mere expansion of intra-European trade, that artificially protected expansion worse than smaller volume and sometime it may be more important to expand trade outside of Europe than within Europe. Objective ECA proposal to reduce restrictions in intra-European trade and bring terms trade more into line with [garble] competitive terms, and widen area competition. Furthermore, although aware reduction dollar imports called for by OEEC principles, nevertheless since ultimate goal is dollar competition, desirable now to establish it on even limited basis suggested by ECA so that it may have salutary effect costs and prices.⁵

9. Ansiaux in sharp reaction to this statement said that if we were not prepared to accept any other system than that proposed in aide-mémoire that there would be no purpose in further meeting of the payments committee. ECA observer expressed surprise at this statement and said that we did not intend to cut off discussion but that our proposals were fundamental and had been most seriously considered and presented. Ansiaux thereupon replied that the committee could proceed with its work. Our appraisal (and subsequent developments confirm) that we have not come to impasse.

Foster

1. Not printed; it reported on the opening meeting of the OEEC Payments Committee on April 21. The Chairman, Hubert Ansiaux of Belgium, had spoken in favor of continuing the existing payments agreement, and the position of the United States (as indicated in footnote 1 to telegram Torep 4720, supra) had been read and distributed to the Committee as an aide-mémoire. (ECA Telegram Files ERC Acc. No. 53A278, Paris Repto)
2. Paragraph 5 indicated that the delegates had been reluctant to express their views on the American aide-mémoire at that time.
3. Paragraph 2 reported on Ansiaux’s remarks in favor of the existing arrangements.
4. Oboe PC’s, presumably OPC’s, overseas participating countries.
5. OSR had been instructed to “vigorously support our position in opposition to Ansiaux statement” and to stress that the basic objective of the American proposal was to reduce restrictions on intra-European trade by widening the area of competition and bringing the terms of trade more nearly into line with normal competitive terms. (Torep 4763, April 23; ECA Telegram Files, FRC Acc No. 53A278, Paris Torep)