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

740.5/12–1950: Telegram

The United States Special Representative in Europe (Katz)¹ to the Administrator of the Economic Cooperation Administration (Foster)²

confidential   priority

Paris, December 19, 1950—7 p. m.

Repto 6905. Reference: Torep 10551, sent London Todep 171.³

1. I agree that: (a) it is time to come to grips with problem OEEC/NATO relations in fundamental terms; (b) there should be considerable measure de facto consolidation economic work NATO and OEEC on practical working basis at points of overlapping and duplication; and (c) importance location in the same city. At same time, to realize full value of these steps, I feel they should be taken in context larger process transition and readjustment. This broader context involves many other factors, including some more far-reaching and fundamental. I also have a question whether reftel does not perhaps lay too much emphasis on importance preserving OEEC as such.

2. It seems to me helpful to take as point of departure functions to be performed. In OEEC/NATO area the principal sets of problems with which we are seeking to deal relate to: (a) political and strategic aspects North Atlantic defense; (b) requirements North Atlantic defense forces; (c) procurement and production planning and expediting for military end items; (d) US aid in its various forms, direct and indirect; (e) supply and distribution of raw materials; (f) liberalization of trade and transferability of currencies; (g) tighter forms of European integration. Of these only the fourth and fifth, i. e., problems relating to US aid and raw materials, involve significant overlapping between NATO and OEEC. The first three fall clearly within NATO orbit. Liberalization of trade and transferability of currencies are the responsibility of OEEC. While OEEC has also been working on problems of tighter European integration—e. g., the Stikker, Pella, and Petsche plans—its activity thus far in this respect has not been promising. It has, moreover, been reduced to comparative insignificance by such developments as the Schuman Plan, and by the possible implications of the French proposal for European army.⁴ To return to the two sectors of important overlapping between NATO and OEEC,—US aid and raw materials—a decision has already been reached to deal with one of these—raw materials—largely through new arrangements in Washington outside both NATO and OEEC.⁵ This leaves problems relating to US aid in its different forms as the principal sector of overlapping and duplication between OEEC and NATO.

3. In light foregoing analysis, it appears that principal remaining functions OEEC are liberalization of trade and operation EPU. It could also be useful in connection administration US economic aid and supply and distribution of raw materials. As to raw materials, however, center will presumably be the new machinery in Washington. As to US aid, other means handling it could be found without too much difficulty. In short, while we appreciate considerations set forth paragraph 4 reftel, and fully agree they should be taken into account, we question the degree of importance which reftel seems to attach to them. We are also dubious whether signs of some demoralization in OEEC, referred to paragraph 3 reftel, warrant much concern. The fact is that OEEC is part of a world in flux, and its officials and secretariat must face that fact along with everybody else.

4. It is, of course, necessary bear in mind that present arrangements NATO are also in process of flux which has tended make some of them obsolete almost as soon as they were established. Within last few months, both NATO and OEEC have been by-passed on three or four important occasions: (a) the bilateral discussions in Washington with UK and with France partially settling MDAP aid⁶; (b) the conversations between the President and the Prime Minister on raw materials⁷; (c) the decision to set up a new combined raw materials board in Washington. These departures were not arbitrary. They reflected the pressure of facts and the changing shape of things. This sort of thing will continue. For example, eventual assignment operational responsibilities for military and end product assistance and economic assistance will largely determine precise scope responsibilities US deputy with respect economic and financial problems. Also, recent appointment Wilson⁸ as Director Defense Mobilization may well have implications affecting nature and functions DPB.⁹

[Here follows Section 5, which stressed the need for the United States to remain ready to rethink and adjust to shifting needs and patterns in the administration of aid to Western Europe.]

6. With respect paragraph 9 reftel, I am skeptical concerning more formal US participation in OEEC. Apart from my doubts as to how far really important maintain OEEC as separate entity, I don’t see what American purpose served by formal US participation. This suggestion pushed by OEEC as counter to argument certain British circles that Europeans can bargain more effectively with US in NATO than in OEEC because they are “partners” with US in NATO and “suppliants” in OEEC. This British argument related to their abstractions about “equitable distribution of burden”. As indicated Repto 6482 and Repto 6047, sent London Repto 1040 and Repto 952,¹⁰ I believe this bears little or no relation to political and economic facts, and will be dissipated by events.

7. As between London and Paris, inclined believe Paris more practical and sensible. In addition considerations set forth paragraph 6 reftel, there is fact that NATO located in London only in limited sense. Actual meetings of the various groups of ministers have been in various capitals, deputies moving with them. However, I have no strong views on this, and agree that either London or Paris feasible from US viewpoint.

8. To sum up, I recommend: (a) settlement US organization and procedures for foreign aid along lines Repto 6836 (today repeated London as Repto 1126)¹¹; (b) location NATO and OEEC in same city; (c) as a minimum, de facto consolidation NATO/OEEC on practical working basis at points of overlapping and duplications; (d) serious consideration more far-reaching adjustment, including possibly substantial absorption one into the other (with certain functions perhaps transferred to third organizations) or absorption both into new or modified organization; (e) continuous review of organizational arrangements and procedures in Europe to keep them in tune with changing shape of things and job to be done.

9. Will seek early opportunity to discuss with Spofford.

Sent Washington Repto 6905; repeated London Repto 1127 eyes only Spofford and Batt.¹² Sent Washington eyes only Foster, Bissell, and Wood, pass Department eyes only Perkins; pass White House eyes only Harriman.

Katz

1. Milton Katz assumed this post when Harriman became Special Assistant to the President on June 28.
2. Foster succeeded Hoffman as Administrator on October 1.
3. Supra.
4. Statement by Premier René Pleven. See footnote 1, p. 403.
5. For related documentation, see pp. 1–610.
6. For documentation on these meetings of mid-September, see pp. 1 ff. and pp. 1108 ff., respectively.
7. For documentation on these discussions, December 4–8, see pp. 1698 ff.
8. Charles E. Wilson.
9. For documentation on plans in late 1950 to transfer the functions and responsibilities of the Military Production and Supply Board to the newly-formed defense Production Board (DPB), see pp. 1 ff.
10. Neither printed.
11. Not printed.
12. William L. Batt, Sr., Chief, ECA Mission in the United Kingdom and U.S. member on the newly-organized North Atlantic Defense Production Board.