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

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

The Administrator for Economic Cooperation (Hoffman) to the Chief of the ECA Mission in France (Bingham)

secret

Washington, November 9, 1949—1 p. m.

Ecato 965. Reference Toeca A–203, Toeca A–204, and Torep 312.¹

1. Torep 312 has been read with great interest here. We concur in Mission’s views on prevalence and possible reinforcement of restrictive business practices in France and are anxious to see further analysis on this problem proceed as quickly as limitations of time and staff will permit. Movement towards trade liberalization and economic integration of Western Europe will undoubtedly give greater impetus to these developments. One of central problems, as you have indicated, will be to find group within French Government that will support anti-restrictionist measures which we could endorse. In this connection, it may be that non-Communist trade unions and their political representatives will offer best prospect if educational process can persuade workers that competitive policy results in increased output, wages and employment.

2. ECA and State also appreciate your excellent report on the possibility of a new European steel cartel (Toeca A–204). Information obtained by the Mission appears consistent with reports in foreign trade publications and newspapers to the effect that this is a pre-cartel stage and that pre-war arrangements have not yet been reactivated either in original or modified form.

3. We have been very much concerned that pre-war cartel members might already be acting in concert and prior to receipt of your report had cooperated with State in drafting circular airgram to interested missions requesting that investigation be made.² Despite indications in your airgram that cartel not active now, plan is to have all interested missions look into problem to develop any other info and views from their sources as supplement to your report. State Dept airgram³ is being dispatched concurrently with this cable.

4. With specific reference to remarks of your informant, we would like to make following comments. Mr. Aron was undoubtedly correct in stating that the French representatives of the pre-war European steel cartel, as well as other countries’ representatives, acted with the formal or informal approval of their respective govts and that these govts will be kept fully informed on future cartel developments. The argument that the work on coordination of European steel investments done by OEEC and ECE implies approval of cartel agreements or makes them essential is fallacious, but will undoubtedly be used extensively by proponents of a new cartel. Our reply should be that OEEC activity in this field should be designed to assist govts, by giving them Europe-wide picture of investment plans and market prospects, to eliminate proposals for uneconomic investments that would require protection by govts or cartels in order to survive. We believe that all countries, regardless of their steel capacity relative to domestic needs, have best guarantee of ability to procure largest possible volume of steel products at lowest costs and prices by permitting free play of competitive forces throughout participating area.

5. The argument that pre-war cartel experience will be utilized so that “bad” features of cartels are discarded and only “good” features retained has a familiar ring and should be regarded with extreme suspicion.

6. We believe that contents of Toeca A–204 will be of interest to other Missions, and suggest that OSR distribute it as follow-up to State circular airgram referred to in para 3.

Hoffman

1. None printed.

2. In telegram Toeca 1275 from Paris, October 11, Bingham had reported to ECA and the Departments of State and the Treasury that Jean Monnet had “expressed great concern over danger recrudescence national and international cartels” and was especially concerned over the role of Germany, which he believed to occupy a key position in the cartel movement. Monnet had no hope of successful opposition to German cartels by the United Kingdom or France but felt that “prompt and decisive action” by the United States could be effective, and he considered the next six months to be the critical period. (ECA Telegram Files, FRC Acc. No. 53A278, Paris Toeca)

   The ECA Administrator replied in telegram Ecato 909, October 14, that ECA was very much interested in the question and was following it closely. (ECA Telegram Files, FRC Acc. No. 53A278, Paris Ecato)

3. Presumably a reference to a circular of November 18 by the Office of International Trade Policy, summarized as follows by the Executive Secretariat of the Department of State: “We have informed a number of our European missions of our concern about rumors current for some time in Europe and the United States that an international steel cartel is being formed. The more reliable reports evidently indicate that while there have been no formal intra-industry or inter-governmental talks concerning the formation of a new cartel, informal approaches have been made from time to time by interested producing countries. Major European steel interests are concerned over the possibility of a large steel surplus if present plans for new capacity in Europe and elsewhere are carried out, and they are not concealing their belief that a cartel would be the most logical and effective means of avoiding resultant competition in export markets.”