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

850.33/12–850: Circular telegram

The Secretary of State to Certain Diplomatic Offices ¹

secret

Washington, December 8, 1950—11 p. m.

254. Schuman Plan negots reaching final stage, with most of text agreed on by Paris negotiators, but certain major issues still unresolved. On suggestion Emb Paris and OSE (Embtels 3092 and 3217²) State and ECA summarizing US views on important unresolved issues. These views represent synthesis of various tels heretofore sent for info to posts receiving this tel. Primary purpose of this summary is for your guidance, in event question of US attitude toward plan shld come up. Summary represents no deviation from our policy that US is not participant in Schuman Plan negots, that success of Plan depends upon determination of member countries to live up to spirit of Schuman original declaration and that Paris shld remain normal channel through which US views given when appropriate to negotiators.

1. General. Adherence to original Schuman principles, on whole, has been extremely close. Will on part of negotiators to overcome practical obstacles has been evident throughout. For these reasons, wld be particularly regrettable if plan impaired by unsatisfactory solution of remaining points below.

2. Relative strength of Council of Ministers. In developing details of Schuman Plan, negotiators have been confronted with problem of insuring that actions of High Auth are taken consistently with needs of six participating countries which fall outside area of coal and steel industry. This has inevitably resulted in delegation of prestige and powers to Council of Ministers along lines not contemplated in original Schuman Plan proposal. We regard this development as inevitable and, with respect to issues which bear directly on defense, altogether necessary. Nevertheless, we are somewhat concerned that in balance of power as reflected in present provisions of draft treaty, influence of Council of Ministers will prove too strong and will provide extensive possibilities for national bargaining based on autarchic considerations.

3. Problem of Belg coal. Suggestion that Belg coal production may be temporarily excluded from single market at beginning of plan and absence of any sched for eventual inclusion are cause of serious concern. We understand that this suggestion is based on view that inclusion of Belg coal in competition with rest of single market wld cause widespread closings of Belg coal mines and that a temporary subsidy adequate to cover cost differential between Belg and other coal industries in single market wld be so large as to be beyond the financial contributions from Ger and Dutch coal production. We are skeptical whether facts bear out this view and feel independent verification desirable. In any case, wld seem necessary to agree on system for Belg coal production which will involve pressures sufficient to force a correction of conditions which give rise to this problem, and a clear undertaking by Belg and other countries that Belg will become a full member within reasonable period time.

4. Cartels. Various proposals for dealing with cartels and restrictive agreements are before conference, ranging from version based on clear-cut principle that producer agreements shld not be used to interfere with competitive process to version based on approach whereby High Auth shld in effect permit such interference by enterprises in broad range of cases.

There are several basic difficulties with any approach which does not create strong presumption against any restrictive agreement. First, whatever may be theoretical defense for procedure whereby each arrangement is considered on its merits and “good” cartels are distinguished from bad ones, procedure of this kind has never worked when tried. Effect of such provision based on case-by-case evaluation wld be to retain cartel-like pattern of operations with real power in producer groups rather than in High Auth. Basic reason why High Auth cld not control restrictive agreements by screening process is that it is virtually impossible to determine in advance, on basis of text alone, what exact economic consequences of restrictive clauses of any contract will be. Further, it wld be difficult for High Auth to modify its judgment on an agreement once it was approved.

It is probable that solution found for this problem will be factor which will have greatest effect on public opinion particularly in US. There are two main trends of opinion in US on Schuman Plan. Dominant one at present is enthusiasm for plan based on political attractiveness. Other view, whose prevalence shld not be underrated, is skepticism as to whether project is anything more than an internatl cartel. So far, it has been possible to insist in good faith that general idea of plan is a single market characterized by competition, and that real auth lies in High Auth, assembly and court, and not in producer groups. If conference shld adopt weak provisions relating to cartels, we anticipate that latter view of plan as a whole will become much stronger. This is particularly important because period of most critical examination of plan by outside interests still lies ahead.

5. Regional group of producers. Same comments apply to suggestions for significant delegation of powers to regional groups of producers. Voluntary business and trade assocs will have legitimate and useful role to play, but treaty shld not make it mandatory for High Auth to use them as its agents. Underlying principle of Schuman Plan is transfer of sovereignty from natl auths to supranational auth which is required to act in interests of community by careful system of checks and balances. It wld be travesty of this concept for treaty to take powers away from natl govts and give them instead to producer groups, thus placing owners and directors of these basic industries outside effective control of any public body.

6. Production and prices. Ever since May 9 proposal, US has considered that emphasis in Schuman Plan on principle of “spontaneous” forces to increase productivity and lower costs in these industries requires that single market shld be generally characterized by significant degree of price competition and price flexibility. If broad powers given to High Auth to fix production quotas and maximum and minimum prices, real doubt wld exist whether High Auth cld reasonably be expected to institute a system which wld meet that definition. It may be necessary and desirable to provide power to High Auth to intervene in periods of great stress to protect the consumer from exploitation. But we think it important that the granting of such powers be conditioned upon criteria sufficiently specific to make sure that they are not used to avoid those fluctuations that must inevitably be required to place cost-cutting pressures upon producers and to influence rational investment, and that are thus essential to achieve objectives of Schuman Plan.

Similarly we wld hope that in dealing with question of rules of price quotation, conference will be guided by importance of maintaining principle contained in original Fr proposal concerning nondiscrimination and access by buyers on equal terms to production of single market.

7. Commercial policy relations with outside countries. Provisions of treaty dealing with relations to outside countries, as they now stand, tend to give impression basic purpose which departs not only from original Schuman statement of purpose but also from our understanding of sincere purpose of present negotiators. All conference dels agree that real purpose is to create an essentially free trade, low tariff area constituting a broad common market, in which productivity will constantly increase, as result of which substantial exporting strength can be built up. Yet impression left by many arts of present text is autarchic and defensive. Stress is laid upon protectionist devices (i.e. protection of community from outside dumping, as well as from outside production in general which is not carried under same “rules of competition” as prevail in community, etc.) rather than upon willingness and even desire of community to meet outside competition.

What has apparently happened is that negotiators have become increasingly preoccupied with problem of how to maintain bargaining power of community during coming negots with certain countries not participating in plan if all essential bargaining counters were surrendered. Purpose is not to increase protection but to obtain negotiating position sufficient to force an equitable reduction in protection by others. Negotiators have indicated intention, which we hope will be effectively carried out, to re-cast language of treaty in order to make quite clear fact that community wld strive at all times to further aims of such multilateral organizations as OEEC, GATT, IMF and wld constantly seek to persuade countries outside community to move away from protectionism in exchange for further concessions by community along same line.

8. Emphasis on flexibility. Response of Amer people and large segments of Eur public to plan will depend to important extent upon whether terms are such as to convince them that, whereas rigidity and protectionism have been characteristic in past, treaty will create new set of common rules and conditions which will compel efficiency and expansion. We do not expect an espousal of virtues of competition and free enterprise in abstract. We recognize member govts must be in position to state before their respective parliaments that purposes and means of action incorporated in treaty are consistent with economic policies of either liberalism or socialism, and with either private or public ownership. Nevertheless, throughout treaty, emphasis shld be placed on idea that new system is directed above all to bring change to present ossified structure, to contribute through these basic industries to creation of a dynamic, expanding economy.

Acheson

1. Sent to Paris for information, London for ISG, and U.S. Delegation at GATT Conference at Torquay, Frankfort, The Hague, Brussels, Luxembourg, and Rome.
2. December 1 and 6, not printed.