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

740.00119 Council/11–749

Summary Record of a Meeting of United States Ambassadors at Paris, October 21–22

Paris, October 21–22, 1949

top secret

Persons Attending Meeting

• Charles E. Bohlen,
• Minister, Paris Embassy
• Col. C. H. Bonesteel,
• Special Assistant to U.S. Special Representative in Europe for ECA
• David K. E. Bruce,
• Ambassador to France
• Lewis W. Douglas,
• Ambassador to Great Britain
• Douglas MacArthur, 2nd, Deputy Director of the Office of European Regional Affairs, Department of State
• John J. McCloy,
• High Commissioner for Germany
• James C. Dunn,
• Ambassador to Italy
• W. A. Harriman, U.S. Special Representative in Europe for ECA
• Robert P. Joyce,
• Policy Planning Staff, Department of State
• Admiral Alan G. Kirk,
• Ambassador to USSR
• George W. Perkins,
• Assistant Secretary of State for European Affairs
• Woodruff Wallner,
• First Secretary, Paris Embassy, Recording Secretary of Meeting

Order of Discussion

1. Reappraisal of progress and setbacks in cold war in Western Europe as they affect present and future U.S. policies.

a. Effect of recent international developments on Western Europe, i.e., Tito heresy, status of Greek civil war,¹ Soviet announcement on atomic bomb.²

b. Present strength and influence of national Communist parties and estimate of future strategy and tactics.

c Problem of East-West trade, possible extension, coordinating action.³

2. Problem of Western European cooperation in political, economic and security fields, looking to integration and basic U.S. policy objectives in relation thereto.⁴

a. Inter-relationships of Western European countries, including United Kingdom, as they affect development of Western European unity.

b. Review of ECA policies, including conclusions of ECA Mission Chiefs Meeting, 20 October.

(1) Special economic arrangements between groups of countries.

c. Role of ECA, OEEC, Council of Europe and Western Union.

d. Recommendations as to specific U.S. actions for the furtherance of Western European integration.

e. North Atlantic Pact and Military Assistance Program.

3. Germany.⁵

a. Germany and European or Western unity.

b. Immediate problems relating to Germany: Berlin, two German governments, dismantling, discrimination and dumping.

4. Methods of increasing coordination and exchange of information among Western European Missions and other questions of interest which may be raised.

friday—october 21, 1949

Morning Session

The meeting opened at 10 a. m. with Mr. Perkins in the Chair.

Mr. Perkins opened the meeting by briefly tracing the history of the concept in the Dept of an informal gathering of the principal Western European Ambassadors. It was the Dept’s thought that the meeting should be entirely informal, that the Ambassadors should examine and discuss the principal problems of U.S. foreign policy which they had in common in the respective countries, arriving at tentative conclusions and perhaps specific recommendations which should be submitted to the Dept for consideration and final action.⁶

The agenda was then considered and it was agreed that the morning session should be devoted to item 1, leaving the afternoon free for item 2 for which specific guidance had already been provided by the Dept (Deptel 4013 of Oct 19). Mr. Douglas suggested, and Mr. Dunn agreed, that if the time was found some attention should be given to the problem of Italian colonies.⁷ Mr. Douglas pointed to the seriousness of the recent British decision to withdraw from Libya entirely if the proposal presently before Committee One of the General Assembly, which provided for the complete unity and independence of Libya, were to be adopted. Mr. Harriman suggested that the subject of the Far East should be included and the hope was expressed that this might be discussed that morning in connection with item 1. Mr. Perkins then asked Mr. Douglas to begin.

Mr. Douglas stated that the British Govt was not over worried by the possibility of hostilities emerging from the Tito heresy and that British public opinion as a whole took a calm view of the situation. The same was true of the announcement of the Soviet bomb explosion, both the Govt and people having reacted with great steadiness to an event which while not unexpected came so suddenly. The continent, however, and especially France—if he was to believe his French colleague, M. Massigli⁸—were in a state of great uneasiness. This was not so much due to concern over possible increased Communist activity as the result of the Tito heresy, or even the atomic bomb announcement, although both were undoubtedly contributing factors, but fear as to the consequences of the devaluation of the pound and the inflationary forces which it had set loose. By far the most important recent development in Western Europe is that Continental confidence, and particularly French confidence, in Great Britain have been shaken. One of the most vital problems before us is to bridge the wide gulf which in the last six months has opened up between the UK and the Continent.

In response to a question by Mr. Perkins as to whether disharmony between the Western nations had reached a point where it could now be considered a greater danger to us than that of the Communist parties in the Western world, Mr. Douglas replied that the Communists were always lurking in the background and saving their strength, waiting to take advantage of just such dissensions.

Mr. Perkins then turned to Mr. McCloy.

Mr. McCloy began by agreeing with Mr. Douglas on the importance of the gulf created between the UK and the Continent and the important influence of the devaluation of the pound on the creation of that gulf. He felt that the effect of M. Bonnet’s report to the effect the U.S. was encouraging British desolidarization from the Continent⁹ had been felt in Frankfurt in the relations between the High Commissioners, and he himself had experienced these repercussions during his visit to Paris to discuss with the French the devaluation of the mark and the price of German coal. He indicated that he would speak at greater length when the subject of Germany came up on the agenda. He said that with specific reference to item 1, the Soviet atomic explosion had caused no tremor in Western Germany and had so far produced no ascertainable effect in public opinion. We are on the verge, however, of a great Communist offensive in Germany, growing out of the creation of the Eastern German Republic which will seek to exploit the existing tensions between the Western nations.

Mr. Perkins then turned to Mr. Dunn.

Mr. Dunn said that the Soviet atomic explosion had had little effect in Italy; that the Italian people were largely occupied with local problems and that there existed a strong undercurrent of feeling that whether the Soviet Union had the atomic bomb or not, the U.S. was stronger and would prevail. The announcement had not shaken Italian confidence in the Western world. As to Yugoslavia, the Italian Govt and people have no faith in Tito. While agreeing intellectually with the concept that the Western nations should exploit the rift between Tito and the Kremlin, Italians generally watched this development with skepticism and even anxiety. The Govt, however, was making a real effort to follow U.S. policy in encouraging Tito economically at least, as witnessed by the recent conclusion of the Italo-Yugoslav commercial agreement which in some respects was unfavorable to Italian interests. The problem of the Greek civil war was largely a matter of indifference in Italy. On the other hand, Greco-Italian relations were rapidly improving. The devaluation of the pound proved a great shock to the Italians, particularly in the industrial North. Italy had stabilized the lira and while some devaluation of the pound had been expected, its method and extent had resulted in bitter resentment against Great Britain and had profoundly affected Anglo-Italian relations. (This is to be added to the bitterness over the British handling of the Italian Colonies issue.) As to the lira, the Italians now expect to hold it to a devaluation of no more than 10% or 12%, and unless there is a general wave of devaluation throughout Western Europe, the Italian Govt is in a position to contain inflationary forces at home. The influence of the Italian Communist Party has steadily decreased since the Italian elections of April 1948, whose psychological effect was far-reaching and long lasting. This trend of contempt for the Communist Party may even prove dangerous as the Party is driven in on itself and adopts more assertive and violent tactics. The Govt can maintain order in the police sense and handle any insurrectional movement but the effects on industrial production of these more assertive tactics may be considerable. The Italians have been 100% cooperative with us in the matter of East-West trade and have adopted all the restrictions which we requested. They have gone further than any other country. The danger now is that Italy may relax these restrictions to conform to those agreed upon by England and France at the meeting on Nov. 14 to which the Italians have been invited.¹⁰

Mr. Perkins then turned to Admiral Kirk.

Admiral Kirk began by reminding the meeting that he had been in Moscow only three months and that therefore he could only give his first impressions. These impressions, however, were extremely sharp. The first was that of living under a ruthless dictatorship from which every vestige of human sympathy, kindness or tolerance had been removed and which “balanced its books” every night. One of the great problems of the Embassy at Moscow was to know what the Soviet people thought. This was particularly true of the Soviet bomb announcement. While the Govt had undoubtedly been caught flat-footed by our announcement of the explosion, the people, when informed, seemed largely unmoved and prepared to accept the Soviet Govt’s explanation that it had possessed the atomic secret since 1947. If there were vast military preparations in the country they were not discernible to the inhabitants of Moscow and it was impossible to tell their extent. As to Tito, there was nothing to add to the cable sent by the Embassy at Moscow on Oct. 8.¹¹ It was clear that the Tito matter had now reached a question of personal prestige between Stalin and Tito and that as far as the Soviet Union was concerned it could only be solved by the disappearance of Tito from the world scene by fair means or foul. It would be a mistake to think that the Soviet had given up the cause of the Greek rebels. In this the attitude of Yugoslavia had been a determining factor and the Soviets undoubtedly expected to resume support of the rebellion once Tito had been eliminated from Yugoslavia. The action of UNSCOB and particularly the valuable military support afforded by the US had also been important factors in the successes of the Greek Govt and together with the Tito defection had greatly discouraged Greece’s satellite neighbors but they too had not definitely given up the cause of the Greek rebels. The grand lines of Soviet policy remained the same, to push and press wherever opportunity offered and to take advantage of every chink in the armor of the non-Soviet world. The creation of the Eastern German state was a simple and inevitable example. China presented great potential advantages and also potential difficulties in the eventual alignment to Moscow of the Chinese Communist Govt. As for Japan, the constant references by Vishinsky¹² to the Japanese peace treaty were but one evidence of the Soviet determination to evict us by one means or another. One of the principal underlying hopes of the Soviet regime was the real conviction that the capitalist system as a whole, not merely the U.S. economy, was on the way to collapse. This theme, which had deep doctrinal roots in Russia, was kept alive by every possible means.

Admiral Kirk suggested and it was agreed that the subject of East-West trade would be taken up separately.

Mr. Douglas asked whether as the result of Vishinsky’s strong statement in connection with the Yugoslav candidacy to the Security Council¹³ we should expect a heightening of Communist Party activities throughout Western Europe. Admiral Kirk and Mr. Bohlen did not think so, pointing out that the statement was primarily destined for consumption inside the satellite area and that at most it indicated the laying of a groundwork for a legal case to be later presented if considered opportune to the effect that Yugoslavia’s election to the SC was improper and invalid.

Mr. Perkins then turned to Mr. Harriman.

Mr. Harriman said that one of the most important psychological developments in the last year in Western Europe had been the abatement of the fear of Soviet aggression and that this had been brought about by the progress of the Marshall Plan, the decline in influence of Communist parties and the development of the Western Union security framework through the negotiation of the North Atlantic Treaty and the passage by Congress of MAP. Outside of the Western European area the most important development was undoubtedly the Tito heresy, and it was obvious that the Atlantic powers should do everything possible to keep his regime afloat so that this sore on the Soviet security and ideological structure might continue to fester and spread. One thing that was of general concern in the general economic and psychological improvement in Western Europe was the unsatisfactory condition of labor, with unity of action movements spreading. As for Greece, it seemed necessary to give greater impetus to the trend of improvement which had taken place and that all branches of US activity in the area, military, economic and political, should be stepped up, that our policies there should be infused with new energies and new determination.

Mr. Perkins stated that the Dept and the US Govt generally agreed that Tito must be kept afloat. To this end he read the conclusions of a paper recently prepared by the Policy Planning Staff¹⁴ and inquired whether the Ambassadors concurred therein. There was general concurrence but the thought was advanced that the Pentagon Building was not in step with the rest of the administration on this matter and that it might therefore be helpful to the Secretary if the meeting dispatched a telegram indicating its agreement with the conclusions of the Policy Planning Staff paper.

Mr. Bohlen pointed out that our general support, economic and otherwise, of Tito in order to exploit his break with the Kremlin should never be allowed to extend to the ideological field. It was highly important that we should not cross this ideological line and find ourselves giving moral approval to what was essentially a Communist totalitarian dictatorship. With that one important qualification we should go the limit. The Tito heresy was the most important recent development, striking at the very roots of Kremlin domination, and may prove to be the deciding factor in the cold war.

Mr. Harriman agreed. The victory or defeat of Tito may be our victory or defeat in the cold war. If Tito is No. 1 business for Stalin, it should be No. 1 business for us. A strong statement to this effect should go forward to the Dept from the meeting.

Mr. Perkins stated that in spite of disagreements of a secondary nature in connection with the approval of the transfer to Yugoslavia of a blooming mill there had been no real difficulty in Washington in providing Tito with such economic help as was available for distribution. This aid was now sufficient to see him through the rest of the year. The ways and means for helping him in 1940 [1950] were under active consideration but no decision had yet been reached. Military aid was another matter. It was generally agreed that in the event of hostilities from the east, Tito could hold out for a very long time in the mountains if he were supplied with small arms from the U.S. Staff studies were now being made and active consideration of the extent and timing of possible U.S. military aid to Yugoslavia was underway. A strong statement from the present meeting of the importance of supporting Tito would be helpful to the Dept at this time and should go forward.

(Note: The statement referred to was dispatched to the Dept as Paris telegram No. 4424, Oct. 22, 1949, and appears as an Annex to this record.¹⁵)

Mr. Perkins then turned to Mr. Bruce.

Mr. Bruce briefly reviewed the decline of the power and influence of the Communist Party in France since May 1947, when it was ousted from the Government. The failure of the great insurrectional strikes of 1947 and 1948 had been a severe blow to the Party and had been a significant victory in cold war in France. Communist Party strength had declined to some 600 or 700,000 members and membership figures of the CGT showed a steady fall. While the Communist Party still control some 180 odd votes in the National Assembly on the basis of the 1946 elections, the expression of this apparent political strength is confined to the Assembly alone and is no longer exercised through executive departments and agencies from which Communist Party members have been increasingly eliminated. The principal source of Communist strength in France remains the CGT in spite of the losses incurred by unsuccessful strikes, where the line has changed to raising the standard of living of all workers on a broad basis and which now calls for unity of action to this end by all the trade union federations. The appeal of this theme throughout working class circles is obvious, and the energies of the Communist Party machine are now directed to develop it. Quite apart from the obvious merits in our eyes of improving the standard of living of French workers, we must beware of the development of this Communist-led campaign since it strikes at the heart of the wage-price relationship around which the inflationary forces in France center. The notable progress made in stemming inflation and bringing up stabilization in France since the beginning of the Marshall Plan, which was most notable in 1949, can be wiped out overnight by a sudden uncompensated disturbance of this relationship, and this is undoubtedly one of the principal Communist objectives. This raises the question of possible governmental action against the Communist Party which, if undertaken, would probably not be opposed by violence as it was two years ago. There are definite indications that the morale of the Communist para-military groups has declined. The result of such action would undoubtedly be to drive the Communist Party under ground. In this great evolution of public feeling toward the Communist Party, particularly among persons who while not Communists were attracted to it the years following the liberation, the appearance of Titoism and the position of the Catholic church in excommunicating Communist militants have been two important factors. With respect to the Soviet atom bomb explosion, this would appear to have had no strong discernible effects as yet on French public opinion, which is strongly marked with pessimism as to France’s fate in the event of an outbreak of general hostilities. This atom bomb announcement has not noticeably increased this feeling of pessimism. With respect to the Soviet East-West trade, the recent announcement of French compliance with certain of our desiderata marked the end of a long and hard struggle.¹⁶ There was still a long way to go and in the last analysis we could expect France to do what Great Britain did and not a bit more. The whole situation cried out for general multilateral agreement among western European nations on this subject.

Finally, the important question of Indochina would be brought up when the question of the Far East was reached on the agenda.

Mr. Perkins suggested that the meeting now address itself to the subject of East-West trade, a subject which in his mind fell into two divisions: (1) the content and the applicability of our present policy as expressed in the IA and IB lists¹⁷ and, (2) the examination of this policy with a view to its possible reappraisal. He then turned to Admiral Kirk.

Admiral Kirk said that he preferred to take up first the question of whether our present policy was correct. He referred to Despatch No. 558, October 1, from the Embassy at Moscow¹⁸ and explaining that it consisted of some 50 pages of careful analysis, proceeded to summarize the principal points and conclusions of this despatch. Pointing to the unreliability of Soviet statistics which seem designed to mystify rather than inform, he said that it was possible to conclude that the ruble bloc as a whole and Russia in particular was extremely short on dollars, other hard currencies and even sterling with which to purchase the know-how and the capital equipment which was essential to the development of the enormous national resources of the USSR. We should, therefore, examine with great care and in the light of the definite advantages which might ensue to the Soviet economy any changes in our policy on three questions:

(1) The price of gold,

(2) International grain and commodity support prices and,

(3) The price level of machinery and equipment, exports from the western world.

It was clear that the Russian economy, industrially speaking, was still on a hit-or-miss basis with important gaps, particularly in know-how. It was now apparent that the western counter-blockade did more to bring the Russians to their knees on the subject of Berlin than had the air lift magnificent as it was. In addition to revealing the essential vulnerability of the USSR economy, this fact made it possible to conclude that the USSR was more dependent on the West than the West on the USSR. If this conclusion is correct, and it is difficult to prove, it should be one of the essential factors in our policy toward East-West trade, for it leads to the further tentative conclusion that it is not impossible that a carefully devised policy of selected blockade, involving foreign currencies, industrial know-how and certain capital equipment, might bring down the Soviet house of cards.

Mr. Harriman pointed out that it was obvious that a complete stoppage of trade between East and West was impossible. The western world require from the Soviet satellite area coarse grains, Polish coal, timber, manganese, etc. It was difficult and sometimes impossible to find alternate sources of supplies for these items and a major shift in economic policy would be involved in seeking to develop such alternative sources of supply.

Admiral Kirk agreed but suggested that there was room to take effective action in numerous fields.

Mr. Harriman said that while we could not afford to stop trade between the western world and the Soviet world, a reappraisal of our entire policy was necessary from both the quantitative and qualitative standpoint. We should have a fresh look at the whole problem of cooperation with our European partners. The mutual security commitments of the Atlantic Pact seem to offer the best basis on which to undertake a concerting of action. Much had already been done through ECA channels but this method would become less effective without concerted multilateral action, although the ECA approach will continue to be pushed vigorously until an alternative is agreed upon. The Atlantic Pact machinery would provide room for three important aspects of controls which were necessarily absent from the ECA approach. These were: adequate emphasis on security and political factors and the tackling of control of industrial know-how. One additional angle which had not received sufficient consideration was the encouragement to technicians in the Soviet world to escape by assurances that they would be welcome and assisted to start a new life.

Mr. Douglas inquired as to the possible dangers of the USSR instituting a counter-blockade if once it started feeling the pinch of our increased control. After some discussion the consensus of the meeting appeared to be that this was unlikely since the USSR was more dependent on the West than the West on her.

Mr. Harriman stated his opinion that unless the whole subject was placed under the Atlantic Pact machinery, it would be impossible to get full agreement with good will even on the IA and IB lists. Much less any tightening up of controls after reappraisal of our policy.

Mr. Bohlen suggested that one point which had been overlooked in the discussion was the eventual needs for eastern European markets for the surplus industrial production of Western Europe, and this question was briefly considered.

Col. Bonesteel said that action must be taken soon if the ground already gained was not to be lost. At a recent informal meeting of several nations called by the French on the subject of East-West trade, it had become clear that we were rapidly approaching a vicious circle in which some nations involved would agree to no more controls than those adopted by the most reluctant nation and that this vicious circle spirit might, unless we were careful, dominate the meeting called for November 14, at which the United Kingdom, France, Italy and the Benelux countries plus the U.S. would attend. Privately most of these nations had indicated their desire for multilateral rather than bilateral consideration of those matters on a political and security rather than on a purely economic basis.

Mr. Perkins agreed that the Department should be requested to undertake reappraisal of our policy and to study the possibility of multilateral approach through the Atlantic Pact machinery.

Mr. Harriman wished to touch on one final point before lunch, the fact that the admission of Poland to GATT was under consideration. He referred to the difficulties already being experienced by the inclusion of Czechoslovakia in GATT and to the basic contradiction between liberalization of trade among democratic countries (on the basis of which ECA had been presented to and accepted by Congress) and the tightening up of East-West trade controls vis-à-vis a member of GATT. He said he felt strongly that the matter of Poland’s admission should be killed if we were not to have trouble with Congress.

The meeting adjourned for lunch at 12:45.

friday—october 21, 1949

Afternoon Session

The meeting reconvened at 2:55 p. m. with Mr. Perkins in the Chair.

Mr. Perkins referred to the Department’s telegram No. 4013, October 19, to the Embassy at Paris concerning a closer association of the western world, which had been previously distributed to persons attending the meeting, and suggested that this telegram serve as the basis for the afternoon’s discussion, broadly corresponding as it did to item two of the agenda. He suggested that each Ambassador take up the discussion in turn, beginning with Mr. Douglas.

Mr. Douglas opened by saying that his basic assumptions were going to be somewhat different from those in the Department’s cable which seemed to revolve around the possibility that France could take the lead in European integration. It was doubtful that France could, would or should take this lead without active participation of the UK. With this thoroughly understood the basic assumptions underlying the discussion which was to follow were:

1. Britain cannot be left in the back yard if unification of Western Europe is to take place; and

2. Economic and political integration in Western Europe of some form is absolutely essential.

This inevitably leads to a thorough analysis of the economic and political position of the UK, an analysis which has heretofore been avoided and whose conclusions will be unpleasant. One basic fact which has frequently been overlooked is that the United Kingdom was never in balance on trade account with the Americas. This imbalance varied between [18%?] and 25%. The rest was made up largely through the processing of raw materials through the London financial system by which the balance in dollars was earned. The gradual disintegration of Britain as a world economic power, which has recently assumed such enormous and dramatic proportions, is the result of a culmination of factors which were present in lesser degree even when British power was at its height. The oldest and most constant factor has been that of mounting costs which reached its apogee after the second world war under the Labor Government. The second set of factors acting toward the disintegration of the sterling area are the growth of nationalism in Asia and elsewhere, the independence of former crown colonies and the consequent growth and development of tariff restrictions within the sterling area itself. Similar forces were at work on the continent which resulted in two wars which almost brought Britain to her knees. These two factors taken together, the cost factor and the forces of disintegration within the sterling bloc, add up to a very serious situation, a situation which it may be impossible for the present British Government or any other British Government to cope with. The problem can be dealt with only by the most drastic internal measures and if no Government can be found to deal with it, the consequences to us and to the rest of Europe will be very serious. The first effort to cope with the situation has been devaluation which has unloosed a series of forces within Britain and the continent whose extent we cannot yet evaluate. To revert to the problem before the meeting, namely, the possibilities of British participation in a closer integration of Western Europe, the present Government is unwilling even to consider, much less to adopt, the measures looking to overcome these difficulties, [apparent omission] so far as Western Europe is concerned, the acuteness and complexity of their troubles including the place of the Commonwealth in their economic structure, tends to make them extremely prudent. This is most natural. But another factor which is highly important is the Socialist and doctrinaire character of the Government and the deep Socialist feelings of its members which makes the number one job in their minds the absolute control of the economic activities of every citizen living under their jurisdiction. A timely example is the recent decision to nationalize steel. This highly centralized domestic economic control makes foreign intervention or too intimate foreign economic intercourse intolerable to the British Socialist leaders, tending, as it does, to reduce their sovereign power to exercise control over their own internal affairs. This is the fundamental contradiction of Socialism with the conception of economic and political integration of Western Europe. Even on the security side the British position is still in doubt if one considers the recent decision of the UK Government to pull out of Libya in the event things don’t go right in the General Assembly, but this cannot be known until the domestic program now under consideration has been announced. It is a big question as to whether that program will be radical enough or drastic enough and whether in 18 months the British situation will not be just as bad as it was before devaluation. These factors make the present régime a very poor prospect as a major element in what we know must be done, namely, further political and economic integration of Western Europe. Nevertheless, this must go on, and we must press ahead elsewhere with integration measures in the hope that the UK will come in and we must press the UK without expecting too much. The situation is not hopeless. There must be elections within the next nine months in England and there are elements there who are acutely aware of the necessity for further British cooperation with the continent and are deeply concerned by the deep ravine which has opened between them. The US should certainly continue to take a more positive position on this whole subject in the OEEC and should support, perhaps more actively than before, the concept of the Council of Europe. The integration of Germany into Western Europe should also be actively pursued. We should go ahead with all those integration measures insofar as we can, regardless of the possible criticism from the British. In considering the degree to which we should press the British, however, it should always be recalled that in spite of gifts, not loans, gifts from the United States and Canada amounting to over seven billion dollars in the last few years, Britain is in the worst financial condition since the close of the Napoleonic wars.

Mr. Perkins then turned to Mr. McCloy.

Mr. McCloy said that in view of the importance of Germany in the problem of European integration, he thought it would be well to consider item three of the agenda at this point, but that first it might be well to raise the question as to whether too much emphasis had not been given to the increase of Russian power in the world and too little thought to the enormously important factor that is the collapse of the British Empire. This collapse may be more important than the problem of Russia. For on the continent the lines are now drawn: they are no longer on the Elbe, they are on the frontier between the Eastern and Western Zones of Germany. We in Germany must now expect a powerful offensive from the East. The creation of West Germany is a great event but is one aspect of the “struggle for the soul of Faust”. This offensive may be more affirmative and threatening than the institution of the blockade. For the propaganda advantages of East Germany are great. First there is Berlin, the old “Hauptstadt” which strikes an emotional cord in Germans, no matter how much they may hate the Russians. Then there is the vision of the enormous hinterland of unknown markets and trade outlets to the east. There is the old dream of unity which is very deep in the German soul. There is the absence of an occupation statute and of a High Commission in charge of Foreign Affairs. The emphasis by the Russians on these themes leads to the supposition that they may be planning to make East Germany the major satellite. There are further disadvantages in the building up of a strong West Germany. The specter of political instability worries the Germans there, and the control of the Government by the High Commission is a factor capable of exploitation. Western Germany is plagued by economic ills, unemployment, the influx of refugees, a low level of economic activity and the loss of its natural granary by an area far from self-sufficient before the war. The return of former Nazis to the community is a further problem. The resistance people are still the leaders in political life but the reintegration of the Nazis into the community has just begun and they are still an unknown factor. Youth has no ties of any kind and has not yet taken a position. The conservatives are still quiet and are yet to be heard from. A disturbing trend is the growth of a spirit of pessimism, a third force feeling contrary both to East and West based on a vague idea of neutrality and marked by a strong cynicism concerning the West and its divided Councils. The idea of partnership in a European federation has a strong basic pull throughout West Germany but it is latent and requires development. Such integration seems most remote but the urge towards it exists and if properly developed may overcome and absorb the cynical third force feeling whose growth has been referred to.

Among the major problems we face in Germany is that of Berlin. The morale of the Western Sectors has fallen abruptly since the creation of the Bonn Government and the end of the airlift. The latter was a terrific morale factor and since its disappearance the real truth of the position of Berlin is becoming increasingly clear to its inhabitants. In this period this is intensified by the double currency system and the fact that the Eastern Sector appears more prosperous than the Western Sectors. This raises the question of the 12th Land.¹⁹ Establishment of Berlin as the 12th Land will not solve Berlin’s problems any more than the airlift did. There is the potential danger of Russian retaliation which looms large in the minds of certain Berliners. Furthermore, the French are firmly opposed. Adenauer²⁰ himself is opposed on practical political grounds because of the additional votes that would go to the Socialist Democratic Party and also because he does not believe in pushing the French too far and too fast on this problem. Under the circumstances can we be more royalist than the King? But in the meantime there are things that can and must be done to bolster Berlin morally and financially. They will be expensive. A device for using ECA funds must be found. Adenauer is about to announce a plan by which the Bonn Government will assume a part of the city’s deficit and certain ministries will have branches in Berlin. These things are merely palliatives. The best hope for encouraging a vigorous position on the part of the West German Government is to nurture the concept of German partnership in a Western European federation. Mr. McCloy then touched on some of the problems, internal and international, involved in the “horrible problem of dismantling”, in which he was joined by others of those present, and a discussion ensued which resulted in no definite conclusions or recommendations.

Mr. McCloy then raised the question of a united Germany versus a truncated Germany. France had always firmly opposed a united Germany and it looked as if Russian action in this matter would for the foreseeable future be decisive. A truncated Germany, however, could hardly be considered, even by the French, a menace to Western Europe whether or not the United Kingdom was included in that Western Europe. Adenauer was strongly and favorably disposed for the federation of Germany into Western Europe. He would insist, however, on equal partnership in the economic field and would not permit himself to be squeezed in measures such as equalization of coal prices if another member of the federation such as the UK was to avoid applying those measures. Adenauer furthermore was favorable to a closer relationship with France but was bitter now against the UK partly because he suspected that British attitudes towards Germany were inspired by the competitive spirit and partly because of Labor Party support of his political rivals, the Social Democrats. He is on good terms, however, with Robertson²¹ and his feeling about the British could be patched up. However, large numbers of British Laborites come to Germany and press toward nationalization to which the French are opposed and to which “we raise our eyebrows but don’t really do anything about”. As for US policy, it must be directed towards pressing for the acceptance of Germany into the European Councils. We must put pressure on the French to let the Germans come in on a dignified basis. Soon they will be in the OEEC, next they should be induced to come into the Ruhr authority and they should have a voice in the solution of dismantling. They should participate in informal economic meetings and should gradually be drawn into inter-European conferences of a non-military nature. There must be restored to the Germans a sense of self-respect, or respectability, if their confidence in themselves is to return and they are to tackle effectively the heavy domestic problems of Western Germany.

Mr. McCloy then touched on the rise of nationalism in Germany which he said had been much exaggerated in the press and which neither worried nor impressed him. The return of the Nazi to the community is taking place in a normal way. These men should be watched for their present rather than for their past attitudes and it is better not to have them underground. The Germans are now thinking more democratically than ever before and it is more and more important to reinforce their faith in democracy. The threat from the East, the emotional responses to Willie Pieck’s²² recent goose-stepping parade in Berlin are very real and we must be prepared to compete with this. On the other hand, German nationalism should not and need not be allowed to get out of hand. We have the power and we should have the determination to crack down immediately on the Germans if they get out of line. An important factor in this is the functioning of the High Commission which must act with harmony, resolution and calm. One drawback has been the unwillingness of the French to give François Poncet²³ more authority. It is hoped that this can be worked out. There are many dangers and pitfalls and obstacles to overcome. It can, however, be done if the Western Powers play the game boldly and in harmony with each other, for it is a game that can be lost, and conventional attitudes and niggardliness at this time can cause us to lose it.

Mr. Perkins then turned to Mr. Dunn.

Mr. Dunn said that there was a strong feeling in Italy for the concept of Western European integration, both economic and political, and that the Italian Government was prepared to furnish a very high degree of cooperation in the practical measures necessary to bring this integration about. This strong feeling, however, was coupled with the conviction that this integration would not take place unless the United States took a firmer position in pushing it and that it could not take place without the active participation of the United Kingdom. This concept of the necessity of UK participation was a realistic, not an emotional, thing, as evidenced by its present strength in spite of the very general and very deep bitterness in Italy engendered by British action regarding the former Italian colonies and the recent devaluation of the pound. Italy also recognizes that England’s economic structure and present difficulties may not permit her to participate fully in integration but they are insistent on the necessity for her to participate actively.

Mr. Perkins then turned to Admiral Kirk.

Admiral Kirk said that the Soviet insistence on German unity largely stemmed from the desire of the Soviet Union to participate in some way in control over the Ruhr. Their present lack of insistence on this aspect is largely due to the pressure of other problems and particularly because of recent Soviet successes in the Far East and the necessity for organizing the new Eastern German state. We may expect them, however, to return to the charge with respect to our policy in Western Germany. Because of the imminent threat from the East, we must be affirmative and strong and do what has to be done without delay.

Mr. Perkins then turned to Mr. Harriman.

Mr. Harriman said that he was now, eighteen months later, faced with the same situation as that involved in the formation of the OEEC in May 1948, where the British had prevailed in setting the pattern of an organization whose impotency was now becoming alarming. He was in accord with Mr. Douglas in believing that the British will not cooperate in what we want in respect to European integration and, more important, what they agreed to do in signing the OEEC Charter. In last analysis the British are not facing up to the fact that they seem to be opposing the basic principle of cooperation upon which the Marshall Plan was presented to and supported by the U.S. Congress, and they must be told so bluntly and immediately. This points to the necessity of further US interest in European economic machinery, for it is clear that not only must US pressure towards integration increase but the US must find some areas for participation in order to accelerate the movement and give confidence to Europeans.

This leads to the thought that the approach of the US to this problem might best be made not from the purely economic or the purely political standpoint but from the standpoint of security which was the most important thing both with us and to the Europeans. Much could be done by the. US under the security umbrella but the ways and means require careful consideration. In the first place, the security organization must not be considered simply a military problem. Secondly, we must not indulge in pipe-dreams or chase rainbows. European integration is going to be a slow thing. Europe is not ready for the establishment of a European Central Bank, or for other such drastic and far-reaching measures. Thirdly, we must press immediately for the integration of a European military organization beginning with the countries adhering to the Western Union. The rebuilding of Europe’s military forces is going to be expensive enough. European economy cannot stand for waste.

Next comes the Council of Europe. Here we should broaden and deepen our influence, and the admission of Germany should have a high priority in our action.

In the OEEC we must reaffirm the necessity for and increase our influence in obtaining the adoption of measures such as the abolition of quantitative restrictions and quotas, the lowering of tariffs and eventually the interconvertibility of currencies. This convertibility could be acquired very quickly if Congress would vote a working capital of something like two billion dollars. Since Congress will not, we must look to other measures, of which the establishment of a European branch of the International Monetary Fund to take over the European payments scheme now appears to be the most workable. Lastly, we must go after and abolish double-pricing and here again the UK is our big problem. The British will have to be told to stop double-pricing, if it is necessary to threaten reducing their ECA allocations to the tune of double the money they make out of the Continent by these schemes. There are certain concrete if limited measures which we should be able to decide upon and adopt. On these we should concentrate: the abolition of double-prices and the reduction of tariffs; the expansion of the Benelux idea to include Italy and France; give up such pipe-dreams as a Central European Bank; encourage but leave to the Europeans the form of further political integration; abandon dismantling; and urge the French to closer relationship with Germany.

The Franco-German problem is a big one but it can be far advanced if the French are told that if they take the lead, the US will give them full support. The French fears of being left alone on the Continent are insidious and dangerous. France is not being left alone on the Continent as the establishment of the North Atlantic Treaty and the Military Assistance Program well show.

Mr. Harriman then said that nothing had disappointed him more keenly than the British attitude toward the proposal to reinforce the authority of OEEC by the appointment thereto of M. Spaak.²⁴ The cables from London and Brussels bearing on this matter were read aloud. There was considerable discussion as to how to cause the British to change their attitude. Mr. Harriman said that it boiled down to making it clear to the British that if they continued to oppose real revitalization of the OEEC and continental efforts to cooperate in the economic field, they were acting contrary to the basis upon which the Marshall Plan was presented to Europe and accepted by the European participants.

Mr. Douglas agreed that something must be done and done quickly but pointed out that the degree of pressure and its timing deserved careful consideration. England was now in a pre-electoral atmosphere and the Labor Party might gain considerable electoral strength by posing as having successfully resisted foreign pressure in the interests of the Commonwealth.

Mr. Harriman agreed that the North Atlantic Treaty was the most important thing and nothing must be done to weaken it.

There followed a discussion as to the degree to which we could expect interconvertibility of European currencies. Mr. Harriman stated that this was a highly technical problem and that at this stage while the creation of a Central Bank would be premature, France, Italy and Belgium could lay the groundwork by making convertibility a reality between their three countries.

Mr. Douglas suggested that the meeting define exactly what was desired in terms of convertibility, abolition of quantitative restrictions and price discriminations.

Col. Bonesteel referred to the points in the Department’s telegram No. 4013²⁵ regarding US participation in OEEC and a change in the unanimity rule in that organization.

Mr. Harriman thought that no change in the unanimity rule was possible unless there was a profound change in the British attitude, and even then it might be opposed by other countries. There seemed little likelihood that US participation in OEEC would be appropriate at the moment; however, the question deserved careful consideration.

Mr. Perkins then turned to Mr. Bruce.

Mr. Bruce said he would direct his contribution to this discussion to item 2 A of the Agenda (interrelationships of Western European countries, including United Kingdom, as they affect development of Western European unity) with special emphasis on (1) the problem created by British reluctance to contribute to European unity, and (2) the problem of Germany’s place therein. The UK’s collapse is one of the most dramatic events of recent history and the suddenness of that collapse has demonstrated the extent and depth of her former close association in the business and financial structure of Europe. In fact, it should be clear to everyone that the UK’s economy is so intertwined with the European economy that no integration of Western Europe is conceivable without the full participation of the UK. This is fully realized by the Continentals themselves. No Frenchman, however much of an Anglophobe he may be or however embittered he may now find himself as a result of the events of the last few months, can conceive of the construction of a viable Western European world from which the UK would be absent. It is this deep conviction which lies at the root of the French fear—almost panic—which, grew out of the rumors that the US was sympathetic or indifferent to the present trend in the UK of disassociation from the Continent. The French know that such disassociation would be fatal to the cause of European integration, and the intimation that the US might be fostering such disassociation produced a combination of incredulity and fear in French Government circles. The result of British disassociation can only be the reversal of the trend towards integration and a return to the worst continental type of autarchy, with each nation retiring behind its national boundaries, as they have so frequently and so tragically in the past. This brings us to the second problem, that of the integration of Germany. All are agreed upon its importance. It should not be thought however that the French alone are recalcitrant on this point. All of the nations that were defeated by Germany in the last war, and in previous wars, are conscious of her latent power and are haunted by the fear that a reconstructed Germany will choose Russia rather than the West in the event of another war. This underlying reality cannot be disregarded or expected to disappear overnight. It must be accepted as a basic factor and compensated for as such. That is why the Department’s telegram appears unrealistic in urging that France alone can take the lead in bringing about the reintegration of Germany into Western Europe. France, and indeed no continental power, can take that lead without assurances of the full backing of the US and of the UK, accompanied by precise and binding security commitments looking far into the future. We have been too tender with Britain since the war: she has been the constant stumbling-block in the economic organization of Europe and if one is to judge by the present temper of Congress and the increasing impatience of American public opinion in matters concerning European integration, the participating countries of the Marshall Plan are going to see their golden goose deliberately killed by the principal participant in the Plan’s benefits. We are therefore faced with the following proposition: economic integration of Europe is impossible without the participation of the UK; upon it hinges the reintegration of Germany into the the Western community; such German reintegration is a cardinal security necessity.

Mr. Douglas agreed with Mr. Bruce’s statement of the problem, with particular reference to the necessity for the reintegration of Germany. We must now examine the best means of solving it. Obviously a “must” program should be presented without delay to the UK, but particular attention should be paid to the degree of pressure to be applied for the reasons already stated.

Mr. Harriman said that our biggest post-war difficulty was that there were many times when we seemed unable to say “No” to Great Britain to the same degree as we have to other European countries.

Mr. Bohlen observed that the central event of the meeting so far was the complete agreement that European integration without the UK was impossible. This must be forcefully brought to the Department’s attention, since it was clear that the Department had not entirely accepted this idea. Once Departmental acceptance was gained, a study should be made of the degree and timing of the pressure to be brought on Great Britain. Mr. Bohlen recalled that the idea of ERP had been sold to the Congress essentially by holding out the promise of European economic integration. He, for one, would be sorry for the man who had to go before Congress next year without some evidence that this promise could be fulfilled.

Mr. Perkins observed that considerations other than purely European ones were present in US Government thinking concerning the British Empire. There was a deep conviction that the US needed Great Britain above everything else. This was consistently true in the Pentagon Building and elsewhere when military questions were under consideration. There was the whole Commonwealth to think about: Great Britain’s world position. All these things must be taken into consideration when studying the problem of how far to press Britain in the matter of European integration.

Mr. Douglas asked if the meeting could agree on the following general principles: (a) that no European integration was possible without the participation of Great Britain nor was it feasible to bring in Germany if the UK was to be absent; (b) we should then define our short-term and long-term policies concerning integration: how far we could go and in what stages; (c) we should then determine what we consider essential that the UK should do.

There followed a general discussion revolving around the relative dangers of abandoning European integration because of England’s unwillingness and placing so much pressure on England that we might lose her support in addition to abandoning integration.

Mr. Douglas asked for agreement on his three principles.

Mr. Harriman suggested the addition of the following one: The Atlantic Pact concept should be the umbrella under which all measures agreed upon should be taken; that security, and not economic integration or political integration, should be the point of departure of our policy.

Mr. Perkins observed that it was time to break up the session. He suggested that Mr. Harriman should have drawn up a series of specific points on which British cooperation within the framework of OEEC should be sought. He asked Messrs. Joyce and MacArthur to prepare a draft telegram to the Department for consideration at Saturday’s session, embodying the general principles and recommendations emerging from the afternoon’s discussions.

The meeting adjourned for the day at 6:45 p. m.

saturday—october 22, 1949

Morning Session

The meeting reconvened at 9:30 a. m. with Mr. Perkins in the Chair. The entire morning was spent in discussing the question of European integration and in drafting and amending recommendations to the Department. Messrs. McCloy and Bruce were absent for about an hour when they called on M. Schuman.

The meeting adjourned for lunch at 12:45.

Afternoon Session

The meeting reconvened at 3 p. m. with Mr. Perkins in the Chair.

Final approval was given to the texts of the telegrams to the Department concerning the Tito Heresy (No. 4424) and East-West Trade (No. 4427), copies of which are annexed.²⁶

A draft of the meeting’s recommendations concerning European integration was considered and sent back for retyping.

Mr. Perkins suggested that the organization of MAP as now contemplated in Washington might be taken up. He and Mr. MacArthur outlined the interrelationships between different U.S. agencies concerned and the plans for a European organization and its staffing pattern, and answered the numerous questions of the Ambassadors.

Mr. Perkins then asked if the meeting wished to discuss the Far East.

Mr. Bruce said he considered the Indochina problem²⁷ to be one in which the Western World had high stakes. In addition to its Far Eastern aspects which involved nothing less than the extension of Soviet control to Southeast Asia, the continuation of the war was a severe strain on the French economy and diverted from the defense of Western Europe sizeable quantities of French military equipment and personnel. From every standpoint it seemed to require the immediate and searching attention of the US and UK, in conjunction with the French Government, with a view to arriving at a common policy and carrying it out. Consultation with the Governments of India and of the independent neighbors of Indochina was also necessary. Conversations along those lines have already occurred but they appeared at best to have been inconclusive. France, after deplorable delays and errors, had finally, last spring, decided upon a course of action, had signed agreements with Bao Dai, given up sovereignty over Cochin China and granted independence to Vietnam within the French Union. This move had been received with considerable scepticism in Europe, Asia and America. Bao Dai had, however, returned to Indochina and was doing better than had been anticipated. The French, too, had been playing squarer than we had hoped, and the negotiation of the supplementary agreements and the turning over of powers to the Viets seemed to be proceeding without undue delay under the circumstances. In the meantime Canton had fallen and the Chinese Communist armies were moving southward. It seemed time for the US to make up its mind how far it was going to support Bao Dai.

In this there appeared to be divided councils in Washington rather than the full agreement on and hearty implementation of policy such as the critical situation demanded. This division of councils seemed to stem in large part from concentration of the more abstract concepts of the problem such as colonialism, nationalism, independence, self-determination, etc. Of course we were against colonialism because it didn’t work and couldn’t work, and for nationalism because it was the strongest force in Southeast Asia. But could we afford to be purists and perfectionists? A more pragmatic approach was essential if we were to get out of the woods. There seemed to be a choice of only two horses to back in Indochina-Ho Chi-minh and Bao Dai. There was no third man or third force. Ho Chi-minh, whatever he might think in his secret heart, was identified with Stalinist Communism. We could not consistently back him even if we were prepared to make the major break with France which this would entail. The alternative was Bao Dai with his imperfections in the framework of the admittedly imperfect agreements of March 8. These agreements were however evolutionary in nature. They were but a point of departure. The French could be influenced to go farther in time and to furnish the elements now lacking to give Vietnam a status approaching that of a dominion. But they needed to know where we stood. It was imperative that we approach the problem in a hard-headed way and make up our minds.

There followed a discussion of the Department’s policy paper on Southeast Asia submitted on July 1, 1949, to the National Security Council,²⁸ and it was noted with regret that the section on Indochina omitted all reference to the March 8 agreements, to the abandonment by France of sovereignty over Cochin China and to the steps taken for the implementation of Vietnam independence within the French Union since Bao Dai’s return to Indochina in April.

The final draft of the meeting’s recommendations concerning European integration was then considered and approved. This was dispatched to the Department as Paris cable No. 4422,²⁹ copy annexed.

Further recommendations re approaching the British concerning the strengthening and revitalizing of the OEEC were put into final form, approved and dispatched to the Department as Paris cable No. 4423,³⁰ copy attached.

The meeting adjourned at 6:45 p. m.

1. For documentation on these subjects, see volume v , compilation on the Yugoslav-Cominform dispute, and volume vi , compilation on the Greek Civil War.
2. On September 23 President Truman announced that “We have evidence that within recent weeks an atomic explosion occurred in the U.S.S.R.” For the texts of this statement and a related one by Secretary of State Acheson, see Department of State Bulletin, October 3, 1949, p. 487. For related documentation, see volumes i and v .
3. For documentation, see volume v , compilation on U.S. policy on trade with Eastern Europe and the Soviet Union.
4. For documentation, see pp. 1 ff, and 367 ff.
5. For documentation, see volume iii , The Council of Foreign Ministers; Germany and Austria.
6. The holding of periodic informal gatherings of the principal Ambassadors in Europe was originally suggested in late August 1949 by Under Secretary of State James E. Webb. As the concept was developed in the Department of State, these gatherings would include Ambassadors Bruce, Douglas, and Harriman and High Commissioner McCloy, and other Ambassadors as appropriate. Assistant Secretary Perkins or other top officers of the Department might attend from time to time. Arrangements for the first meeting and the definition of items to be considered were worked out in a series of telegraphic exchanges in September and early October between the Department and the various posts. Documentation on the origin and organization of this meeting is in file 120.3 Conferences.
7. For documentation on United States policy with regard to disposition of the former Italian colonies in Africa, see pp. 526 ff.
8. René Massigli, French Ambassador to the United Kingdom.
9. For documentation on this subject, see telegram 3961, September 23, from Paris, p. 663.
10. During 1949 the United Kingdom and France developed a list of commodities (the Anglo-French list) that were embargoed from export to Eastern Europe and the Soviet Union. Representatives of the United States, the United Kingdom, France, Italy, Belgium, and the Netherlands, and observers from Denmark and Norway, met in Paris, November 14–25, to formulate a common export control program based on the Anglo-French list. A report on these meetings, telegram Repto 7579 from Paris, November 25, is included in the compilation on U.S. policy on trade with Eastern Europe and the Soviet Union, scheduled for publication In volume v.
11. The reference is presumably to telegram 2537 from Moscow, October 7, the text of which is included in the compilation on the Yugoslav-Cominforin dispute, scheduled for publication in volume v.
12. Andrey Yanuaryevich Vyshinsky, Minister for Foreign Affairs of the Soviet Union.
13. On October 20 the General Assembly of the United Nations elected Yugoslavia to a seat on the Security Council. Documentation on the election of non-permanent members of the Council is presented in volume ii .
14. Presumably document P.P.S. 60, September 12, 1949, included in the documentation on the Yugoslav-Cominform dispute, scheduled for publication in volume v.
15. The text of telegram 4424 is included in the documentation on the Yugoslov-Cominform dispute, scheduled for publication in volume v.
16. The reference is presumably to the revised and enlarged Anglo-French export embargo list which served at Paris in October as a basis for discussion among American, British, French, Belgian, Netherlands, and Italian Representatives looking toward formulation of a common export control policy. The discussions and the new list are reported in telegram Repto 6884 from Paris, October 15, scheduled for publication in volume v.
17. The United States export control policy involved a “1–A list” of completely embargoed commodities and a “1–B list” of commodities whose export was severely restricted.
18. Scheduled for publication in volume v.
19. For documentation on the question whether Berlin should be regarded as the 12th Land of the Federal Republic of Germany, see vol. iii, p. 361.
20. Konrad Adenauer, since September 20 Chancellor of the Federal Republic of Germany.
21. Gen. Sir Brian Hubert Robertson, United Kingdom High Commissioner for Germany.
22. Wilhelm Pieck, since October 11 President of the “German Democratic Republic”.
23. André François-Poncet, French High Commissioner for Germany.
24. For documentation on the proposed appointment of Paul-Henri Spaak to a high post in the OEEC, see pp. 447 ff.
25. Supra.
26. Telegrams 4424 and 4427 are included in the compilations on the Yugoslav-Cominform dispute and on U.S. trade with Eastern Europe and the Soviet Union, respectively, scheduled for publication in volume v.
27. Documentation on the Indochina problem is printed in volume vii.
28. Documentation on this subject is scheduled for publication in volume vii.
29. For the text of telegram 4422, see p. 342.
30. Telegram 4423 is summarized in footnote 2, p. 434.