Foreign Relations of the United States, 1950, Western Europe, Volume III

740.5/10–2050: Telegram

The Ambassador in the United Kingdom (Douglas) to the Secretary of State

confidential

London, October 20, 1950—4 p. m.

Depto 116. 1. At meeting Working Group of seven¹ October 19, attended by finance and production experts, Spofford presented as US paper Nitze doc (re Todep 63). Delegates indicated agreement therewith subject to conditions and considerations brought out country comments summarised following paragraphs.

2. French delegate hoped WG of twelve (NATO/OEEC) re paragraph 6c US paper would have HQ in Paris, but thought WG could itself decide location. Would expect experts to study detailed aspects of US paper before final consideration and approval. Suggested deletion paragraph 7, since reaching of decision referred to therein not responsibility of WG. He raised question of difference in functions between various working groups. French view was that formulation recommendations should be responsibility WG of seven deputies, making use of all information available, including information from OEEC and from studies prepared by WG of twelve. Others pointed out that giving group of seven these basic responsibilities would probably encounter objections from unrepresented countries.

3. UK delegate urged WG of twelve be established immediately. Expressed preference for HQ in London. WG of twelve would be, in their view, concerned primarily with giving direction to OEEC on basic assumptions countries to follow in answering OEEC questionnaires and also on additional information OEEC should assemble for NATO purposes. Stated that military and production assumptions would probably have to be determined initially by military and production agencies NATO but later revised on basis provisional economic assessments. UK thought NATO should consider experience WU financial machinery before final decisions taken.

4. Italian delegate expressed view main function WG of twelve seemed to be forecast economic impact defense program. This would require assumption with respect to distribution of burden which he did not see could be done by WG of twelve without going through sequence of (a) applying military requirements in order to (b) determine production effort and hence (c) cost required, and finally (d) distribution of burden.

5. Norwegian delegate said would have introduced paper similar to US and therefore in full agreement. Emphasized basic policy decisions required before OEEC forms can be filled out. Favored Paris for location WG of twelve.

6. Canadian delegate agreed generally with US proposal. Suggested WG of seven experts study and comment on proposal but thought this should not delay Council Deputies establishing WG of twelve soonest possible. He suggested group of twelve be established immediately to perform functions 6(a) and (c), while deputies are considering balance of paper.

7. Netherlands delegate expressed view WG of seven deputies could not make decisions for solution of problems but that all deputies would have to participate.

8. US in reply to Italian statement above agreed that hypothetical assumptions are necessary to progress with work which possible only on basis successive approximations. One initial assumption in first approximation economic impact would be no US assistance or mutual aid. In response to French question we stated WG of seven experts would have considerable work load for some time but would confine itself to making organizational and procedural study. It was a temporary group to recommend permanent machinery.

9. Meeting agreed that WG of seven should assemble October 20 to determine agenda of work. Also agreed that paper submitted by US should be forwarded to deputies for their background information. Meeting asked experts to draft resolution for consideration of WG of seven establishing WG of twelve in accord paragraph 6 (a) and (c). Draft resolution follows:

“The Working Group wish to recommend to the NAC deputies:

1. That there be created at once an economic and financial Working Group of all the member countries, based on the NATO countries delegations to the OEEC (including the USA and Canada) utilizing as necessary the services of other technical experts.

2. This working group shall:

(a) Review the form of OEEC questionnaires covering general national accounts, balance of payments, budgetary projections and commodity information to insure maximum usefulness for specific NATO purposes as well as the general purposes of the OEEC;

(b) Recommend to the deputies as soon as possible what, if any, supplementary submissions should be made by the NATO member countries covering more specific information bearing on the impact of the military programmes on their economies and their relative abilities to carry the burden of expanded NAT defense requirements;

(c) Consider, and recommend to the deputies as soon as possible any steps they may consider necessary to insure that the assumptions concerning defense expenditure that underlie member government submissions adequately reflect NATO military planning.”²

Sent Department Depto 116, repeated Paris 654 (for OSR).

Douglas

1. Working Group on Production and Finance, composed of seven Deputy Representatives on the North Atlantic Council: those of Canada, France, Italy, the Netherlands, Norway, the United Kingdom, and the United States.
2. The NAC Deputies, at their 27th meeting on October 24, approved the slightly, revised resolution with an expression of hope that the new working group would soon be organized in Paris.