ECA Telegram Files, FRC Acc. No. 53A278, Paris Repto: Circular telegram
The United States Special Representative in Europe ( Harriman ) to the ECA Missions in Europe
Repto circular 239. Reference Repto circular 232 June 25. Following are principal features of agreement reached early morning July 1 by OEEC Council on, (a) principles intra-European payments system for 1949–50 involving special Belgian situation and transferability of drawing rights1 and (b) Plan for liberalization of trade.
Special Belgian situation.
Estimated 400 million Belgian surplus intra-European trade covered by drawing rights and credits applied as follows, on assumption $200 million conditional aid for Belgium on account Belgium Western hemisphere deficit:
- Next $125 million of Belgian trade surplus (above $200 million) covered ½ by dollars to be earned by Belgium through operations payments plan and ½ Belgian long term credits (probably to be distributed among UK, Netherlands and France) at interest and amortization rates and other terms similar ECA loans.
Next $75 million of surplus to be covered ⅔rds by dollars earned as aforesaid and ⅓ by credits extended by Belgium.[Page 406]
Thus Belgium estimated surplus in Europe in excess of Belgium’s assumed Western Hemisphere deficit would be financed by 112, 500,000 ECA dollars to be earned by Belgium and $87,500,000 Belgium credits.
- Limitation of aggregate drawing rights which might be transferred to Belgium as result transferability provision described below, computed on net basis, to $40 million.
Transferability of drawing rights.
- It was agreed that feature of convertibility would be abandoned for present.
- Drawing rights granted are to be 75 percent bilateral and 25 percent transferable i.e. debtor may choose to transfer this 25 percent away from “original” creditor at debtor’s option. When drawing rights transferred, corresponding conditional aid dollars also transferred.
- Limitation of aggregate drawing rights which might be transferred to Belgium as result transferability provision, computed on net basis, to $40 million.
- Provision is made for OEEC supervision over workings of plan as well as for appeals to OEEC in case of complaints against restrictive practices.
Liberalization of Trade—Council adopted document provisionally approved by consultative group on June 4 regarding liberalization of trade through removal of quantitative restrictions and other barriers. (CGM 49–152). We consider this to represent definite commitment to action.
We here are pleased at results and feel that they represent real achievement for OEEC. Agreement reached after process of frank, arduous discussion is definite advance toward breaking rigid bilateralism and increasing competition. It paves way for progressive liberalization and multilateralization of trade. Belgium willingness to extend equivalent $87.5 [million] credits at ECA terms represents highly important contribution and should be viewed in light of probability Belgium will have to make substantial further credit effort in connection with Benelux. Belgium, by agreeing to limit amount of drawing rights transferable to them, facilitates British acceptance of plan.
British made significant contributions by withdrawing from their long maintained stand that transferability of drawing rights with movement of conditional aid dollars was totally unacceptable to them. In so doing, they permitted organization to accept unanimously principle which, while not applicable for present as broadly as eventually [Page 407] desirable, is vital first step toward liberalization intra-European trade and payments and introduction real competition.
French delegation led by Finance Minister Petsche adhered throughout to principle of transferability of both drawing rights and conditional aid and showed courage, initiative and ingenuity in finding conciliatory solutions and in exercising at all times helpful influence.
Dutch and Swedish delegations also contributed to clarification of issues.
In conclusion, we here believe that ECA has reason for real satisfaction with progress achieved by OEEC and we wish to express our thanks to mission chiefs and other mission personnel who by explaining our position and objectives in accordance with Repto circular 232 June 25 have contributed to result achieved.3
Sent Frankfurt for Collisson.
- The full text of the OEEC agreement with respect to the new intra-European payments scheme was transmitted in Repto 5038 from Paris, July 2, not printed (ECA Telegram Files, FRC Acc. No. 53A278, Paris Repto).↩
- This document has not been found in Department of State files, but for a summary of the agreement on liberalization of trade, see telegram Repto 4533 from Paris, June 5, and footnote 3 thereto, p. 401.↩
- Repto circular 240, July 4, not printed, listed the following advantages of the new payments plan: (a) effective transferability was provided by the creation of a multilateral purchasing power pool, (b) movement of full conditional aid would increase competition among the participating countries since additional dollars were the prize for successful competition, (c) the United States had accordingly attained many of the benefits that would have resulted from partial transferability, (d) new purchasing power on a multilateral basis had been introduced and would provide for a basic attack on bilateralism among the participating countries, and (e) the provision for periodic examination and review made possible a further degree of flexibility in the operation of the system. (ECA Telegram Files, FRC Acc. No. 53A278, Paris Repto)↩