740.5/10–1850: Airgram

The Secretary of State to the United States High Commissioner for Germany (McCloy), at Frankfort

top secret

[Subject:] German Contribution to Production for Defense.

A–1100. At a meeting on October 12, 1950, with representatives of the Department of Defense a question arose as to whether it was possible to spell out the US position on the above subject. Representatives of the Department of Defense had put on paper some observations on this question for possible future use at the forthcoming meeting of the Committee of Defense Ministers. It was decided that the Department of State should take those parts of Defense’s paper dealing with production and develop them somewhat. This has been done in consultation with ECA.

Though the following represents only an approach to a discussion of the principles of German contribution to production for defense, it is felt that HICOG will want to know that the issue has arisen in connection with a meeting of the Defense Ministers. HICOG is requested to furnish its comments on the following at the earliest. The State, ECA draft memorandum follows:

German Contribution to Production for Defense

1.
The following discussion of German contribution to production for defense hinges on the premise that an integrated military force for the defense of Western Europe will be created, and that the NATO [Page 390] Powers agree on the inclusion of German contingents. It is implicit in this premise that the Federal Republic will have entered into the agreement and into the spirit of joining its efforts to those of the NATO Powers, but this is an assumption that cannot be made at this time. The recommendations herein are subject to these controlling conditions.
2.
The early establishment of the agreement envisaged in the Schuman Plan will greatly facilitate the establishment of economic and political relationships through which German contributions to common defense can be made on a basis satisfactory to the members of NATO who are participants in the Schuman Plan, and to the United States.
3.
The concept of integration carried forward through NATO in the military field, is similar to the concept of integration in the economic and political fields of the Schuman Plan. This concept, in both fields, provides a safeguard against domination of the collective system by any one power and is another step in achieving an integrated Western Community.
4.
The build-up of the military strength of the NATO countries to a level adequate to insure the security of Western Europe, should be accomplished with the utmost urgency. This will impose an extremely heavy economic and financial burden on the NATO powers. The program contemplated will call on the one hand for increased production to be financed largely by Government expenditures, and on the other hand for diversion of resources from present uses and reduction in civilian consumption.
5.
The NATO countries should not be required to make sacrifices in standard of living unless Germany is also required to make a proportionately equal contribution of effort and sacrifice.
6.
The German economy is industrially advanced, and while in poor repair, it can under realizable conditions produce substantial amounts of goods in excess of present production. Those fields in which an immediate and continuing contribution could be made by Germany include steel, coal, non-ferrous metals fabrication, shipbuilding, anti-friction bearings, fine mechanics and optics, machine tools, vehicles, chemicals, electrical equipment and miscellaneous items. NATO should prepare recommendations for such small arms and light military equipment as Germany may furnish for the integrated forces. Any recommendations that may be made as to military equipment are not to be put into effect until Germany is firmly committed to and has begun to implement the common defense plan. Though estimates of future German production are exceptionally speculative, it is highly probable that Germany could produce at an additional annual rate [Page 391] of one billion or more dollars 18 months hence, and thereafter at ail increasing rate.
7.
However, Germany, like the other countries, must solve the problems of financing, of raw materials, of capacity, and of allocations. It is at this writing impossible to do more than state these problems. The difficulty of resolving these problems suggests that considerable delay will in any case ensue, following the adoption of the principle of contribution by Germany.
8.
The Allied High Commission for Germany with the advice of NATO should deal with the Government of the Federal Republic of Germany to arrive at an agreement with respect to the means and extent of Germany’s contribution, and with respect to the supervision to be exercised by the High Commission and the Federal Republic within the framework of a common defense plan agreed by NATO. It will be necessary to establish a relationship between the Federal Republic and NATO in order to facilitate planning and the placing of orders. The Deputy Defense Ministers should study the manner of such a relationship.
9.
The High Commission should forthwith establish contact with the North Atlantic Military Production and Supply Board, and should provide to NATO information needed and the appropriate recommendations for a production program for Germany in accordance with agreed military requirements.
10.
The revision of the Prohibited and Limited Industries Agreement, beyond the changes already approved, should be undertaken by the Occupying Powers in such a way as to facilitate implementation of decisions reached in NATO. The High Commission should make the necessary arrangements with the German Federal Republic to facilitate the increased production necessary for defense force requirements.

Acheson