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

ECA Telegram Files, FRC 53A278, Paris Repto: Circular telegram

The United States Special Representative in Europe (Harriman) to the Administrator for Economic Cooperation (Hoffman) and to the Chiefs of the ECA Missions in Europe

confidential

Paris, December 12, 1949—2 p. m.

Repto circular 415.

1. This circular sent with approval ECA/Washington. Immediate purpose is inform Missions general line development ECA policy on work program for promotion European economic integration. Broader purpose is maintain continued common understanding among Missions, ECA/Washington and OSR. It does not call for any specific action by Missions but is intended provide background for action by Missions pursuant Repto circular 382¹ especially paragraph A–5 and paragraph C.

2. Hoffman’s speech October 31 defined integration as “the formation of a single large market within which quantitative restrictions on movement of goods, monetary barriers to flow of payments, and eventually all tariffs have been permanently swept away.” He called on OEEC to have ready early in 1950 “a record of accomplishment and a program, which together, will take Europe well along road toward economic integration.”

3. OEEC council resolution November 2 endorsed general goal in preamble, set immediate task of QR (quantitative restriction) removal on 50% private intra-European imports by December 15, 1949, undertook to widen area of intra-European currency transferability through next payments plan and by “such additional arrangements and central institutions as may be appropriate to this end” and required Executive Committee to report on program of action for coming year.

4. Hoffman’s speech and council resolutions supported progress toward integration both through arrangements among all participating countries and through arrangements among regional grouping provided that latter contribute toward and are not in conflict with wider goals.

5. Work program over coming few months in this field stems from, above cited documents. Executive Committee has set January 15 as deadline for OEEC second interim report; unlike first report, it will not only cover progress to date and re-analyze long-term problems but will be focused toward necessary addition action, national and collective and will lay out 1950 plan of action. Present outline calls for specific discussion economic integration and we hope will include statement basic elements system of currency transferability replacing existing IEPA.

6. You are familiar with current work on 50% QR removal which is to be followed in January by OEEC decision on further steps in trade liberalization. Our central goals in this field for coming months are total or near total elimination QR’s by progressive steps but completed during calendar 1950 and achievement full intra-European currency transferability at least for current transactions.

7. Basic elements of plan for European currency transferability are now being worked out. Consideration is being given to building it around arrangements such as a clearing union or substantial equivalent supplemented by a pool of resources plus a mechanism to induce such changes in internal economic policies or in exchange rates as may be needed to control deficits and surpluses.

8. Outline such plan virtually complete. Will circularize soonest.²

9. Compared with ultimate goal single market this short-term work program does not cover tariffs, freeing of capital movements or freeing of manpower movements. We recognize moderate tariff protection as legitimate either to reduce during period of adjustment shocks of elimination QR’s and exchange control restrictions or to maintain economic activity of strategic or other special national importance. Except within very limited regional groupings, tariff reductions are necessarily much more gradual than immediate goals sketched above. We also consider removal exchange restrictions on capital movement of secondary priority although such removal among pairs or groups of countries should be encouraged. Arrangements for increased freedom for migration of labor should also be encouraged.

10. Work program outlined above should cover virtually all, if not all, participating countries. In this framework, regional groupings would have special significance only if they promise substantially faster action toward general goal or substantially closer association among partners. Faster action might mean total elimination QR’s and current account exchange restrictions within next few months or faster elimination capital account restrictions. Closer association might mean progressive tariff reduction looking toward customs union or plan for economic union.

11. In addition there is possibility of more organic unions, such as projects for Benelux or Franco-Italian economic union. Such unions would require harmonizing wide range internal economic and social policies in fields such as taxation, credit policy, social security, and other welfare legislation. As indicated paragraph 4, efforts of this kind are fully in keeping with and indeed facilitate foregoing program of Western European integration.

Harriman

1. Ante, p. 445.
2. The text of the working paper on intra-European currency transferability and trade liberalization was transmitted in Repto circular 416, December 12, not printed. Two days later each ECA Mission was instructed to present it to the responsible minister of the Government to which it was accredited. The working paper was designed to set in operation before the end of the existing ECA program a system of “full intra-European currency transferability providing freedom of intra-European payments on current accounts, rapid elimination of quantitative trade restrictions, and maximum possible freedom of invisible transactions.” (ECA Telegram Files, FRC Acc. No. 53A2T8, Paris Repto)