Policy Statement Prepared in the Department of State1



a. objectives

Our broad objective with respect to the Free Territory of Trieste is to reach a lasting political settlement for the area, based upon consideration of the welfare and wishes of the inhabitants, by mutual agreement among the parties directly concerned. The achievement [Page 1338] of such a settlement is a necessary condition for the termination of our commitment in the British-United States Zone (Zone A) of the Free Territory. Within this broad framework, our policy in the administration of Zone A has the following objectives: (1) to provide for the needs and well-being of the population; (2) to foster, within the limitations of Allied Military Government’s role as a caretaker, the development of democratic concepts and practices in the local government; (3) to consolidate economic recovery in the Zone; and (4) to develop the basis for the future prosperity and stability of the Trieste economy as a part of the Italian economy.

b. policies

The Italian Peace Treaty establishes the city of Trieste with a small hinterland as an independent Free Territory. The United States Government joined the British and French Governments on March 20, 1948 in proposing that the Treaty be amended to return the Free Territory to Italian sovereignty. This step, while timed so that it obtained support for pro-Western democratic parties in the Italian elections of April 1948, was substantively a public avowal of our conviction that the solution of the Trieste question envisaged in the Treaty was not workable, would not adequately protect the rights and interests of the inhabitants of the area, and would not contribute to the establishment of peace and stability in the northern Adriatic.

This conclusion is supported by experience in the Security Council of the United Nations and in the administration of Zone A. The possibility of establishing even the contemplated provisional regime for the Free Territory was initially compromised by Soviet unwillingness to agree to the appointment of a Governor acceptable to the other interested parties, and by steps taken by the Yugoslav Military Government to establish a regime in Zone B according to the communist pattern. Although the Soviet Union now poses as the champion of the Treaty settlement, it is abundantly clear that the purpose of the Cominform is to exacerbate and exploit the tensions arising from the Trieste question. Since Italian and Slovene irredentism can be expected to continue, it is doubtful whether a Governor of the Free Territory could successfully maintain a stable and democratic regime in the face of Cominform measures to exploit the deeply divided feelings of the inhabitants of the Free Territory. The Governor’s success would be rendered the more improbable by the fact that the Free Territory, under present conditions, cannot be expected to constitute a viable economic unit without continued extensive assistance from the outside.

Our policies with respect to Trieste, therefore, should not be directed toward the establishment of a permanent regime for the Free Territory. [Page 1339] A lasting, peaceful settlement of the Trieste question, based upon consideration of the welfare and wishes of the inhabitants of the area, can best be achieved by agreement among the parties directly concerned, initially Italy and Yugoslavia. We should strive to create an atmosphere conducive to such agreement, and should be prepared to help implement the settlement agreed upon.

The problem of means to obtain such a settlement, being primarily a question of relations with countries outside the Free Territory and with the United Nations, is not considered in this paper. (See country policy statements on Italy and Yugoslavia.2) The foregoing is set forth as a framework and background for our policies in the administration of Zone A, which are discussed in this paper.

Political. The basis of the Allied administration is in Annex VII of the Italian Peace Treaty, the “Instrument for the Provisional Regime of the Free Territory of Trieste”. Article 1 of this Annex provides that the Anglo-American and Yugoslav Military Commands shall continue to administer their respective zones of occupation as they existed at the time the Treaty came into force. This Annex is presently in force, except in the case of provisions whose applicability clearly depends upon the prior appointment of a Governor. In the absence of a Governor, it may be considered for some purposes that the Zone Commander is clothed with the attributes of the Governor of the Free Territory. This is the case, for example, in connection with the last sentence of Article 2 of Annex VII, which states that “The Governor’s actions will be guided by the needs of the population and its well-being.”

Since the UN Security Council has not fixed a date for the entry into force of the Permanent Statute (Annex VI) in accordance with Article 21, Paragraph 3 of the Treaty, the Permanent Statute as a whole is not in force. The penultimate sentence of Article 2, Annex VII stipulates that provisions of the Permanent Statute shall be applicable during the period of the Provisional Regime as and when these provisions prove to be applicable and in so far as they are not superseded by the Instrument for the Provisional Regime. The present applicability of individual provisions of the Permanent Statute must be determined by the American and British Governments in specific cases. Under present circumstances we should seek to avoid taking the position that such provisions constitute legal obligations. Many of these provisions which are not now applicable, nevertheless, should be used by the Allied Military Government as a policy guide.

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Our policies with respect to the administration of Zone A should be developed in close cooperation with the British Government, with whom we share the responsibilities of occupation.

In view of the provision in Article 21 Paragraph 1 of the Italian Peace Treaty that the integrity and independence of the Free Territory shall be assured by the Security Council of the United Nations, we should ensure that Zone A is so administered pursuant to Annex VII of the Treaty as to satisfy the Security Council. The Commander of Zone A should continue to submit periodic reports upon his administration to the Security Council. We should attempt to avoid, however, discussion in the Security Council of charges and countercharges with regard to conditions in the two zones of the Free Territory.

We should regard the Allied Military Government of Zone A as an interim caretaker government fulfilling the responsibilities of governing the Zone pending an ultimate political settlement for the area. In accordance with the first sentence of Article 10, Annex VII, Allied Military Government should see that laws and regulations existing in the Zone remain in effect, unless their modification is clearly dictated by the needs of the population and its well being. We should make sure, wherever possible, that our actions within the Zone are conducive to the achievement of an Italo-Yugoslav agreement upon a settlement of the Trieste question, and should avoid measures which would create a vested interest among groups of the population in the continuation of the status quo in Trieste.

Pursuant to the functions of a caretaker, the Allied Military Government should continue to assume responsibility for the protection of the rights and interests of permanent residents of Zone A. It should provide security against all threats, external or internal, to the integrity of the Zone and to public order. Allied Military Government should not, however, exercise all the attributes of a government of a sovereign entity in international relations. Thus, whereas Zone A is represented in the Organization for European Economic Cooperation, it should generally not acquire membership in international organizations when adequate alternative means of protecting the interests of its permanent residents are available. We should take no steps toward the establishment of a separate Triestine citizenship. For the present time, Allied Military Government should neither permit the establishment of consular offices in Zone A nor send consular officials to other countries.

Subject to the central authority of Allied Military Government, local and municipal government in Zone A should continue to be conducted by native civilian officials freely and democratically elected by the permanent residents of the Zone. Local civilians should also participate, [Page 1341] to as great a degree as possible, in the administrative functions of the Allied Military Government.

The Allied Military Government should take steps, including if necessary the revision of local law, to assure to all persons under its jurisdiction, without distinction as to ethnic origin, sex, language, or religion, the enjoyment of human rights, including the right under law to life, liberty and property, and the enjoyment of the fundamental freedoms, including freedom of religious worship, language, speech and publication, education, assembly and association. Although full application of these principles in the case of the Slovene minority in Zone A is complicated by the intransigence of Italian nationalists in the area toward the Slovenes, we are convinced that development under Allied Military Government of a pattern of fair treatment of the minority will help to ameliorate Italo-Slovene relations and will in the long run contribute to peace and stability in the area.

While scrupulously avoiding support for any particular political party in Zone A, we should encourage the conduct of political activity in a democratic manner, and should encourage, particularly through the instrumentality of the USIS, the orientation of the population of the Zone toward the West. We should take firm steps to prevent communist and neo-fascist groups from transgressing the law, and should take all possible measures consistent with democratic administration to diminish the influence of these groups over segments of the Zone’s population. We should encourage the development of a democratic labor movement in Zone A, to counteract the influence of the communist-dominated Sindicati Unici.

Since the tripartite proposal of March 20, 1948, a tendency has become evident among officials of the Italian Government concerned with working-level relations with Zone A to regard the Zone for practical purposes as a province of Italy. Whereas it is our policy to preserve the cultural, psychological, and economic ties existing between Zone A and Italy, we should make it clear to these officials in appropriate instances that, until the Italian Peace Treaty is modified, Allied Military Government continues to exercise jurisdiction over Zone A.

Given the vastly differing political systems existing in the two zones, experience has shown the development of any close and friendly relationships between Allied Military Government and the Yugoslav Military Government to be most difficult. We should strive, however, to develop and maintain cooperative and mutually advantageous relations with the Yugoslav authorities of Zone B and to reduce to a minimum the causes and manifestations of interzonal frictions, which can only reduce the probability of achieving a settlement for [Page 1342] the area agreed upon by Italy and Yugoslavia. We should continue to oppose efforts of the Yugoslav Military Government to take a hand in the internal affairs of Zone A.

Economic. Neither Zone A nor the Free Territory of Trieste as a whole can be considered actually or potentially a viable economic unit. Historically, the city of Trieste grew to economic importance by virtue of its position as the principal port of the Austro-Hungarian Empire. At present the city is detached from its hinterland, and recent political and economic developments in central and eastern Europe have caused a marked reduction in Trieste’s traditional entrepot trade.

Under present circumstances, the economy of Zone A can prosper only if it is treated as part of the Italian economy. According to the terms of the Italian Peace Treaty pending the appointment of a Governor for the Free Territory and the establishment of a separate currency regime, the Italian lira is legal tender within Zone A, and the Italian Government must supply the Zone’s needs for foreign exchange and currency. In the spring of 1948 agreements were concluded between Allied Military Government and the Italian Government under which the Italian Government declared itself ready to supply adequate financing for the needs of the administration (i. e. to meet the agreed budgetary deficit) and to satisfy the foreign exchange needs of the Zone under conditions no less favorable than those applying in Italy. By agreement, the foreign exchange earnings of the Zone are transferred to Italy. Furthermore, all foreign trade of the Zone is carried out within the framework of Italian commercial treaties or agreements and in accordance with Italian foreign currency regulation and controls. The economy of Zone A, therefore, is closely tied to that of Italy.

In addition to these arrangements with the Italian Government, Zone A is also receiving economic benefits from three other sources: (1) aid under the European Recovery Program, (2) invisibles earned through the routing of ERP3 cargoes for Austria through the Port of Trieste, and (3) expenditures of Allied troops in the Territory.

With the assistance of ERP and the preceding relief programs, a notable degree of economic recovery has been achieved in Zone A. The phase of repairing the extensive war damage to the productive plant and commercial facilities of Zone A has been completed, and the ECA program has now entered the phase of stimulating the economy of the Zone to higher levels of productive activity and of modernizing its productive equipment. Unemployment, while still [Page 1343] a serious problem in the Zone, is much less serious than two years ago, and present employment figures compare favorably with those of 1938.

During the remainder of the ERP period, we should utilize available assistance to promote the highest possible degree of economic development in Zone A, in order to cushion the impact which will eventually result from the withdrawal of temporary stimuli to its economy.

We should extend substantial assistance to Trieste’s principal economic sector, namely, shipbuilding and port activities. We should assist in the modernization of other existing industries and in the expansion of their output. We should encourage the establishment of new industries in the Zone and the achievement of a greater diversification of the Zone’s economy. We should take measures to attract private capital to Trieste. We should guide such industrial expansion into channels best calculated to reduce unemployment in the Zone to a minimum.

Concurrently, we should continue to strive to improve the fiscal and budgetary position of the Zone, in order to minimize the Zone’s requirements for external financial assistance. Within the limits of our Treaty obligations, we should assure that these steps are taken in a manner consistent with the close coordination of the Zone A economy with the Italian economy, upon which it indeed depends, and within a framework of cooperation with all the countries participating in ERP. If we should continue to hold responsibilities in the administration of Zone A at the time when ERP terminates, we should be prepared to extend whatever further economic assistance the Zone may require.

Armed forces. British and American troops in Trieste should remain until (1) an agreement is reached by the United States, the United Kingdom, and other friendly signatories of the Italian Peace Treaty on the future of the Free Territory calling for the withdrawal of British and American troops, and such agreement is put into effect with appropriate recourse to the United Nations; or (2) the American and British governments, in the light of existing conditions, agree to order the withdrawal of troops, with appropriate action in the United Nations; or (3) the troops are forced to withdraw as the result of armed attack by superior forces.

Pending any of these eventualities, British and American troops in Zone A should be maintained at approximately the strength authorized by Annex VII of the Italian Peace Treaty, unless overwhelming strategic requirements should at any time dictate their reduction.

Ceremonial visits to the port of Trieste by vessels of the United States Navy should continue.

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c. policy evaluation

Our efforts to promote agreement upon a lasting political settlement for the area of Trieste have not yet succeeded in achieving the necessary initial step, namely agreement between Italy and Yugoslavia. Consequently, the political conditions requisite to liquidating our commitment in Zone A have not yet been established.

Meanwhile, Allied Military Government has been generally successful in fulfilling its responsibilities in the administration of Zone A. Local government is carried on according to democratic practices which had been blotted out during the period of Fascism, and members of the Slovene minority are recorded rights and protection which they had not enjoyed beforehand. While some of Allied Military Government’s actions inevitably arouse criticism among extremist groups in the population of the Zone, or among their partisans outside the Free Territory, the Allied military regime has proved to be as palatable to its subjects as any military government can be.

With respect to the economic objective, we have been successful in repairing Trieste’s war-damaged productive equipment and have achieved, with the assistance of ERP, increased employment, stabilization of the cost of living, and a substantial decline in the budgetary deficit. We have not succeeded in attracting the investment of outside capital in Trieste, nor have we been able to develop Trieste’s economy to a point such that it might be expected to prosper without outside assistance at the end of the ERP period, in the event that the political status quo should still prevail at that time.

  1. The country and area policy statements were documents prepared in the Department of State for the use of its senior officials and those of other interested agencies of the U.S. Government.
  2. Neither printed.
  3. European Recovery Program.