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

850.33/5–2050: Telegram

The United States Special Representative in Europe ( Harriman ) to the Secretary of State

confidential

Paris , May 20, 1950—6 p. m.

Repto 2743. Re: Torep 4049.¹

1. This cable represents joint preliminary views OSR and ECA Mission France re French steel-coal proposal, in light discussion with Monnet and London and his assistant Hirsch here. Bruce concurs.

2. Believe proposal may well prove most important step towards economic progress and peace of Europe since original Marshall speech on ERP. It is first indication of bold, imaginative, concrete initiative on part of European country in attacking two basic problems: (a) Integration of European economy and (b) Conclusive alignment of Germany on side of West with minimum political and military complications.

3. Important to note that French do not regard this as just an idea thrown out for discussion but an invitation to begin negotiations soonest on bases as specified in Govt’s statement, including access on equal terms to French and German markets, equalizing conditions of life and work, immediate elimination of tariffs, and objectives of production at highest level of productivity. French do not contemplate entering into negotiations with Germany or other country which does not accept bases of negotiation as stated. They regard these bases as essence of plan, and if they should modify them they would be in position of repudiating their own proposal.

4. Believe successful implementation depends on maintenance initial momentum which has been gained by effective timing and dramatic announcement. See Embtel 2302 May 15. President’s public endorsement should be helpful in this connection.

5. Re your paragraph 2. Believe proposal consistent ECA objectives trade liberalization; EPU and concept of ultimate single competitive market. Believe that as practical matter it will constitute important step towards same objectives. Note that it contemplates immediate elimination of tariffs among participants. Recognize that publicity may temporarily distract public and political attention from previous OEEC–ECA program, but believe net effect this dramatic elimination trade barriers in two industries will be encouragement and added impetus to general attack on same. In this connection important to note that proposal involves not only elimination trade barriers but relinquishment of sovereignty over important segment economic affairs in favor international organ. To regard proposal only as means of cushioning shocks and hastening readjustments required by trade liberalization, as suggested your paragraph 4, would in our opinion seriously under-estimate its significance, prejudice its success and lose advantages mentioned paragraph 2 above.

6. Cartel angle will need careful watching, but if proposal does not go thru there will probably be far greater danger of serious cartel abuses in this field. Following factors suggest cartel abuses can be avoided under French proposal:

• (a) Proposal expressly calls for highest level productivity.
• (b) Monnet says this means elimination of less effective producers, including closing substantial number French coal mines and that this was specifically called to attention of Cabinet when it approved proposal.
• (c) French industry fearful that proposal will break up existing cartels.
• (d) Protection of marginal producers would be recognized only as transitional device. Believe unrealistic expect free competition without some transitional period.
• (e) Hirsch stresses intention to export to outside countries at competitive prices and that this will create pressure to keep domestic prices at least as low as world prices.

7. See Monnet group memo on cartel aspects of which text given part three Secto 234 from London from Bruce May 12.

8. Creation single market in coal and steel may in and of itself carry consequences in these and other industries that cannot now be foreseen. Our attempt analyze implications should not be allowed interfere with the release of an impetus the results of which, altho in part unpredictable, will in general operate in favor our objectives. It is in this context that we intend explore further with French Govt various problems raised by proposal and practical difficulties that will have to be overcome in putting it into effect. These include (a) relation between price for sales within member countries’ exports to others (b) extent if any to which authority would allocate sales or markets after transition period (c) extent of and criteria for fixing maximum or minimum prices (d) policy re new enterprises and new investments (e) grounds of and procedures for handling appeals from authority.

9. Proposal calls for development indistinct stages: (a) negotiation and ratification of treaty with Germany, including necessary HICOM approval (b) further negotiation of details under supervision of arbiter designated pursuant to treaty with power to resolve deadlocks (c) similar negotiations with other countries, which may overlap those with Germany.

10. As regards stage (a) in paragraph 9 above, our first decision must be on position in HICOM re commencement of negotiations. Believe this should be unqualifiedly in affirmative. Also hope any influence US may wish to exert over course of negotiations be directed towards attainment of broad political objectives and not detailed intervention. Otherwise, delays, especially resulting from possible exercise similar efforts for different purposes on part of British, may be fatal.

11. Whatever reservations US may have re ultimate operation of scheme should if at all possible be deferred until text of treaty available, and participants approaching second stage—that of working out operating details.

12. Plan to work out joint Embassy, OSR and Mission procedure for keeping in touch with developments here. Likewise understand McCloy contemplates appointment special assistant in ECA Mission to Ger to follow developments there. Understand his role would be keep informed and offer such informal advice as may seem appropriate but not participate in or act as official observer at negotiations since to do so would invite British participation that might be obstructive.

13. In conclusion, wish emphasize overriding importance that this opportunity be not lost and that US throw full weight its support for prompt initiation and consummation of negotiations with Germany and any other countries France may invite. Suggest diplomatic and ECA Missions be circularized to this effect.

Sent Dept Repto 2743, rptd info Frankfurt Repto 310, London Repto 395.

Harriman

1. In telegram 4049 to Paris, May 13, not printed, Webb summarized for Milton Katz, Acting U.S. Special Representative in Europe (ECA), the Department of State’s reaction to the Schuman proposal (ECA Telegram Files, FRC Acc. No. 53 A 298, Paris Torep).