850.33/10–350: Telegram
The Acting Secretary of State to the Embassy in France 1
1717. Fol are Dept and ECA comments on memo on Schuman Plan contained in Embtels 1610, 1630, 1634, 1646, 1647, 1649, 1652, 1653, 1664, and 1669.2 Tel in two parts. First contains those pts which we consider most fundamental. Second contains additional pts on which we feel further clarification or modification desirable.
I. Fundamental pts.
A. Gen. Principal reactions Dept and ECA expressed earlier tels still hold in main. Three developments in particular which we consider disturbing are: (i) Whittling away of powers of High Auth in favor of Council of Ministers and to some extent High Court. We recognize estab of supra natl Auth functioning in ltd sphere of coal and steel industries raises problems of relation its actions to gen economic and polit policies of countries concerned. Our impression however that functions assigned Council of Mins are greater than wld be necessary meet this problem and impinge on areas in which high Auth shld have exclusive jurisdiction, (ii) Increased interference in price flexibility and price competition in market for coal and steel within six countries. While we have recognized that competition in coal and steel industries will inevitably be imperfect, present doc indicates increased tendency toward intervention by High Auth and, even worse, by agreements among producers on prices and production. We do not think justification of such intervention on grounds that it is necessary as countercyclical device is sufficient to warrant lengths to which this development has gone, (iii) Protection of single market against outside competition and increased concern with possibility of [Page 755] “anti-economic consequences of unruly competition” within complex. Commercial policy provisions, for first time, contain emphasis on need for exclusion imports in certain circumstances from countries outside single market.
B. Powers of High Auth. We consider various organizational provisions of new text substantially weaken supranatl character of High Auth and tend give too much power to Council of Mins and High Court. New provisions giving Council of Mins budgetary control over admin expenses of High Auth, while seemingly only a matter of admin rather than of principle, cld readily operate to place Auth under domination of Council. Provision apparently extends not only to overall approval of budget but to right to determine salary scales and nr of employees. If some review of overall size of budget, either prior to adoption or as part of annual report, is believed necessary, we consider Common Assembly more appropriate body than Council of Mins. In any case, we believe High Auth must have full power determine how admin budget is to be used, including, in particular, power of decision on nrs and types of employees required.
We also question desirability of requiring concurring opinion of Council of Mins in recommendations addressed to govts as indicated Embtel 1634 Para III–2. Since recent docs do not include texts Arts 20 and 26, it is difficult understand provision precisely but we wld oppose concept that Mins, particularly unanimously, need concur in recommendations to govts on matters within competence of Auth. Requirement that Council of Mins must concur in recommendations on wages and equalization of competitive conditions addressed by High Auth to govts cld make it virtually impossible for High Auth to operate in these fields since govt to which recommendation was to be addressed cld veto recommendation in Council of Mins. Our difficulty with this provision is compounded by fact that we have never been sure of exact nature of High Auth’s powers to take measures insure “equalization of economic conditions” referred to in Embtel 1634, Para III–2.
We are also not clear what is meant by phrase “fix the terms of a common representation for the negotiation of a commercial treaty”, referred to in same section i.e. whether it means Council wld select individuals either from membership of High Auth or otherwise, or whether it means power of Council wld extend as well to setting terms of reference for negotiation. In any case, we attach importance to principle that with respect to concessions asked or recd of outside countries re coal or steel, views of High Auth shld be determining.
Finally we believe that any commitment on part of High Auth under which they agree not to disturb level of income and employment or balance of payments equilibrium of member countries cld, to [Page 756] extent it lacks qualification, effectively hamstring efforts of Auth in direction of creation single market. Estab of single market inevitably wld have some repercussions on balance of payments or employment in member countries, consequences of which must be accepted if principle of single market is to have meaning. Because of importance which we attach to broad interpretation of any such provisions in light of purposes of agreement, we are loath to see Court of Justice granted any powers in adjudicating situations involving balance of payment and full employment issues. We believe Court shld have no part in settlement of these disputes and wld prefer Common Assembly for this purpose.
C. Production and prices. Production and pricing sections place heavy emphasis on sensitivity of industries to fluctuations in economic activity and importance of measures to restrain these fluctuations or to shield industries from their effects. Despite attempt to include various safeguarding provisions, our impression is that production limitations and minimum prices would be normal means whereby Auth wld attempt to meet decline in demand for steel or coal. It was never our understanding that purpose Schuman Plan was primarily to assist industries to meet problems overproduction through restrictionist measures. Our strong preference would be for price and production controls, whether imposed by regional associations or by High Auth, to be limited to conditions of extreme shortage, when it might be necessary to resort to maximum prices and to compulsory scheduling of steel production. But we are not sure from here whether best approach is to take this position flatly with Schuman Plan negotiators or to take alternative position that there shld be included in treaty standards which wld limit freedom Auth to impose production limitations and minimum prices.
D. Readaptation fund. Concept of readaptation fund, as developed in new memo seems to call for permanent fund designed to ease burden of technological unemployment, rather than fund temporarily set up on declining basis to meet initial shocks directly associated with creation of single market. This change is indicative of excessive preoccupation with absorbing shocks of increased competition connected with single market regarding which we have previously expressed concern. This new concept of readaptation fund, which we assume is concession to Itals, creates important motivation for High Auth resisting technological innovation, since any such innovation creates risks of new demands on readaptation fund.
E. Short supply allocations. As indicated above we wld hope High Auth wld not have power to enforce compulsory production programs except perhaps in connection with extreme shortage resulting from rearmament problems. Moreover, we think principle is objectionable, [Page 757] as set out in Embtel 1664 Para 14, that any shortages in single market wld first be met by reducing exports. We believe Schuman Plan countries shld recognize principle that even in periods of short supply, consuming countries are entitled to reasonable share of complex’s production and that, in general, part of sacrifice shld be met by simultaneous restrictions within complex on civilian consumption coal and steel.
F. Restrictive business practices. We gather High Auth is charged with enforcing provision that there should be no agreements which restrain competition, yet may approve price fixing and production quota agreements. These exceptions seems to us to remove most of substance of general remarks against restrictive practices and we fail to see how such private agreements, with or without High Auth approval, can be consistent with Schuman Plan conception. Moreover, we see little in proposed powers of Auth which suggest it will really be able to make investigations and enforce findings against enterprises engaged in restrictive practices. For this and other reasons, direct access of Auth to records of individual enterprises and unequivocal commitment of govts to enforce Auth’s decisions in this field seem essential.
II. Other points.
To extent you can do so without reducing effectiveness in presentation of major points above, you may make fol added points:
- A.
- We still think treaty shld guard against possibility of “court packing” operation directed against High Auth (see Deptel 1209,3 Para 1).
- B.
- Provision that High Auth may dismiss a member by agreement of other members seems unfortunate. Might better meet difficulty this provision seems aimed at by limiting Auth’s term of office to, say, five years, and providing procedure for trial and discharge based on malfeasance charges.
- C.
- Had hoped dels wld find more imaginative and effective means whereby High Auth cld enforce its decisions than by simple repliance on executive arm respective govts. Is procedure whereby Auth goes into natl courts to enforce decisions against individual enterprises out of question?
- D.
- Proposal that overseas territories of member countries extend to Schuman Plan countries any preferences now accorded to metropolitan area troubles us. Auth’s existing tariff preferences are already recognized and sanctioned in GATT but preferences granted through export restrictions (including discriminatory pricing) and preferences granted in import restrictions (except those justified on balance of [Page 758] payments grounds) are in violation of GATT provisions. We suspect that, on investigation, most of the preferential export and import restrictions practiced by Fr North Africa in favor of metropolitan Fr wld be found inconsistent with GATT. We wld probably be unwilling to sanction any such illegal action by agreeing to its extension to other countries. We would however probably concur in the extension of any legal preferences such as the existing tariff preference between Fr Union members and in discrimination which resulted from elimination of quantitative restrictions by DOT’s applicable to Schuman Plan countries.
- E.
- Still unclear why High Auth shld use the regional assocs as apparently exclusive channels for encouraging development of research.
- F.
- We gather that negotiators are still thinking in terms of natl, rather than internatl perequation funds. We assume we will be hearing more from you re these funds so that reiteration of our previously expressed view that such funds shld be internatl may possibly be premature at this time.
State has strong additional reservations on trend of negotiations re relations of complex to outside countries and re proposed approach on GATT waiver. These now under discussion with ECA. Joint comments will follow soonest.