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

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

restricted

Paris, November 10, 1949—9 p. m.

Repto circular 382. Reference Repto circs 367 and 375.¹

A. Purpose this message is outline program energetic affirmative action to be taken by missions as part of coordinated effort by missions, ECA/Washington and OSR towards objectives outlined Hoffman speech, OEEC Council’s resolutions of November 3 [2] and certain additional programs. Missions are requested take initiative along lines indicated below, keeping OSR and ECA/Washington informed. Substantial progress essential before next presentation to Congress. Goal is to establish record of constructive achievement by January 31, 1950 on following objectives, of which first five specifically covered Hoffman speech and council resolution November 3 [2].²

1. Elimination quantitative restrictions within intra-European trade before December 15, 1949 on at least 50 percent of imports separate categories as described in paragraph one of first council resolution and compliance with ITO charter standards for imports on government account as indicated paragraph two. Missions requested keep in close touch with government’s progress in complying with this resolution and should be especially on the alert to discourage seeking of loopholes under paragraph five.³ 50 percent figure is regarded as a minimum. Where any country in position to do better mission should use its influence to that end.

2. Elimination of dual pricing,—i.e., maintenance of export prices for fuel and basic materials in intra-European trade at higher level than domestic prices. Resolution III instructs executive committee inquire into ways and means accomplishing this and to submit a report soonest. We cannot simply wait for this report. Missions should continue to look for and report to OSR any specific cases where their countries are either suffering from dual pricing or engaging in such practices themselves. Missions should press upon governments specific steps toward elimination of practices and report same.

3. Appropriate measures in fields of finance and fiscal policy to avoid inflation resulting from devaluation.

4. Provision of real incentives to private exporters to channel exports towards dollar markets. OSR will act as clearing house for exchanging ideas and proposals among missions but initiative and follow-up must be done by missions. In this connection see Repto circ D–28⁴ regarding Netherlands plan allowing exporters to retain for legitimate purposes specified percentages of dollars received. Will also circularize shortly British plan for guaranteeing certain expenses incurred by private exporters in connection with market surveys, credit risks, etc. Another device available in some instances is channeling those production materials which are still under allocation to those who produce for sale to export areas. This subject will be covered in more detail in forthcoming separate message.

5. Development of regional arrangements. As indicated in Hoffman’s speech, ECA looks with favor on regional arrangements which are in harmony with and constitute steps toward ultimate goal of an integrated European market. It is important that missions in PC’s which are now considering regional scheme, keep closely in touch with such developments, offer maximum encouragement to governments and help them work out immediate steps, keeping OSR and ECA/Washington fully informed.

6. Direct attack on productivity. Emphasis should be on affirmative assistance to PC’s in getting them to submit useful projects rather than negative approach of screening applications. Direct approach should be through channels of (a) technical assistance projects, (b) plant modernization through industrial projects or counterpart release, (c) emphasis on information program. Include stress on agricultural productivity, as indicated in forthcoming circular. In this connection, missions should be alert to existing restrictive business practices and dangers of reviving now dormant cartel arrangements.

7. Analysis of investment programs including counterpart use. This will be covered by circular cables to follow soon.

8. Development of overseas territories. Plans to this end now well under way. Missions in countries concerned should continue to give this careful attention and vigorous support.

9. Methods of penetrating dollar markets. In addition to incentives to private exporters mentioned in paragraph four above, governments should be persuaded to give immediate consideration to governmental measures along lines suggested in Taylor report.⁵

10. Stepped up information program designed to induce action along all above lines in accordance plans discussed at recent meeting information officers.

B. Above objectives should be primary goal of mission activities between now and January 31. OSR will keep missions informed of supporting efforts of ECA/Washington and OSR.

C. Missions will also be called on from time to time to assist in development activities pursuant Resolution II on transferability of currencies and measures designed meet other fundamental requirements European integration as set forth Hoffman speech. OSR and ECA/Washington working with OEEC will concentrate on these developments.

Harriman

1. Neither printed.
2. For a description of the Council’s resolution (in six parts), see editorial note, p. 438.
3. Paragraph 5 of the section on liberalization of trade read as follows: “if any member country feels unable, in the light of its economic and financial situation, to implement this decision fully, it shall report its reasons to the Organization before December 15, 1949.”
4. Not printed.
5. See editorial note, August 29, p. 421.