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

611.55/5–850

Policy Statement Prepared in the Department of State¹

secret

Washington, May 8, 1950.

Belgium

(For the purpose of this statement Belgium will include Luxembourg)

a. objectives

The long term objective of US policy for Belgium is to strengthen, both economically and politically, Belgium’s position as a member of the western community of nations. For the present and for an indefinite time to come our most important specific objective is to insure an uninterrupted flow of Congo uranium to the United States.

b. policies

Political. Belgium is one of the more stable and economically advanced of the Western European countries and, as such, does not require direct assistance from the US. It is, however, to our interest to assist Belgium to retain its political and economic health and thus to contribute to the stability of Western Europe. Our relations with Belgium are as untroubled as those with any other country. The Belgian and American peoples share a longstanding mutual admiration, and the Belgians have been an invaluable ally in efforts to combat Communist expansion and to consolidate Western Europe.

In dealing with Belgium’s internal situation, US policy has been one of strict neutrality on the troublesome “Royal Question.”² US representatives have limited themselves to expressing the hope that some solution to this dilemma would be found by the Belgian people through their own democratic processes and to pointing out that the stability of Belgium is important to Europe and the free world. Until some permanent solution is found, however, Belgium will probably continue to be more stable under the present Regent than it would be should his controversial brother be restored to the throne.

Belgium as a colonial power presents no major political problems to the US. Economically an important element in our policy is to assist in the development of increased production of raw materials being exported to this country from the Congo, of which uranium is of paramount importance. We seek to encourage, both through organs of the United Nations and otherwise, Belgian policies which will promote the political, economic, social, and educational advancement of the inhabitants of the Belgian Congo and the Belgian trust territory of Ruanda-Urundi, areas much larger than Belgium herself. With increasing Communist efforts to obtain the allegiance of colonial peoples, constructive colonial policies on the part of the administering authorities are essential to the welfare of the entire free world.

The principles on which US policy towards the Belgian Congo and the Belgian trust territory of Ruanda-Urundi are based are those subscribed to by all UN members, as stated in Articles 11 and 12 of the United Nations Charter, and including the political, economic, social, and educational advancement of the inhabitants. US policy towards dependent areas is expressed in such UN bodies as the Trusteeship Council, the General Assembly’s Fourth (Trusteeship) and Special (Non-Self-Governing Territories) Committees, and certain of the specialized agencies. Belgium is highly sensitive to any criticism of her colonial administration, or any action which she considers an infringement of her responsibilities as administering authority, and in certain UN bodies, particularly the Fourth and Special Committees of the General Assembly, Belgium (along with Britain and France) has differed with the majority (including the US), especially in her interpretation of the functions of these committees.

The unfortunate divergence between the colonial powers and the US has led to a review, presently under way, of Department policy on colonial questions, preliminary to consultations with the Belgian, British, and French governments. It is hoped that a greater degree of understanding between the US and colonial powers will be achieved as a result of these conversations.³

Benelux. The US regards the efforts of Belgium, Luxembourg and The Netherlands towards achievement of a complete customs and economic union as a healthy economic growth and a contribution to European economic development. We will welcome a complete Benelux customs and economic union as long as it conforms with the principles of the ITO Charter.

Close attention, however, should be paid to potentially restrictive aspects of the Benelux union and their effects on the European Recovery Program,⁴ particularly because the Benelux union is often cited as an example for other European unions. For instance, Belgium has agreed with the other two members that expansion of productive capacity in some twenty-three industries, as well as establishment of new industries, will be the subject of consultation among the three governments with the apparent purpose of eliminating “undesirable” competition. This is a matter of grave concern to us, and the operation and effects of this agreement, particularly the intra-industry discussions in Benelux to implement its terms, should be followed closely in order to determine if the Belgian Government or Belgian industry is fostering restrictive business practices (e. g., limitations on production and division of markets) as a substitute for the governmental trade barriers being removed within the Benelux area. These practices could not only frustrate the basic objectives of the Union but also prove detrimental to the European Recovery Program.

Information and Cultural. In the past cultural exchanges have contributed substantially to the friendship existing between the US and Belgium. Under the Belgian-American Exchange Foundation sponsored by Herbert Hoover nearly thirty years ago, more than 700 Belgian students have visited this country. Nearly all of these occupy today prominent positions in Belgium. Several cabinet members such as Paul van Zeeland, Pierre de Wigny and Van Glabekke are former exchange students. One of the main objectives of our Information and Education program in Belgium is to maintain this reservoir of good will in the face of popular ignorance and adverse propaganda.

Economic. Belgium is one of the most highly industrialized countries, with a dense population and few natural resources. Its prosperity depends mainly on large-scale imports of raw materials and on the export of manufactured goods. At present, over-all per capita consumption of food and other nondurable consumers goods are approximately equal to pre-war levels.

Belgian postwar economic developments have been characterized by an early transition from a controlled to a liberal economic system made practicable by a rapid recovery of industrial production, high level of consumption and an early establishment of monetary stability. In such a period public works were reduced to a minimum while industries were fully employed to meet the demand for goods for domestic consumption and export. A deliberate policy of deferring investments was applied also to the private sector of the economy, through a government policy of high interest rates and stringent credit controls, which encouraged the postponement of modernization of plants and equipment.

After the removal of practically all government controls in 1947, the government limited its economic policies to fiscal and monetary measures designed primarily to maintain internal monetary stability. Lack of flexibility in the implementation of orthodox fiscal policies, especially on the part of the National Bank, was probably responsible for the fact that postwar inflationary pressure was recently replaced by deflationary trends, reflected mainly in relatively large unemployment figures. In spite of the fact that industrial production was estimated in 1949 at 116 percent of prewar, in December 1949 total unemployment was estimated at 265,000 or 13.2 percent of the insured labor force—a favorable field for communist propaganda. The government announced at the end of 1949 an expanded public works program of 20.9 billion francs to combat unemployment during the fiscal year 1950, a program which should employ directly or indirectly 80,000 to 100,000 unemployed workers.

Belgium’s traditional foreign trade pattern—export surplus to other European countries and import surplus from the Western Hemisphere—has been restored. Its strong trade and payment position in the postwar period has enabled Belgium to increase its gold reserves by $105 million between the beginning of ERP and the end of 1949. Belgium’s over-all exchange position depends mainly upon the ability of soft-currency countries in Europe to pay for Belgian manufactured goods in freely convertible currencies. ECA assistance in the form of conditional aid and off-shore dollar procurement has up to now provided the payment facilities which allow Belgium to earn in Europe the dollars necessary to cover its dollar deficit. Belgium apparently hopes that this “derived” viability will be maintained after the ERP period through general European convertibility.

Recent developments seem to indicate some shift in the pattern of Belgium’s foreign trade. Belgium’s European export surplus has declined in 1949 and, as a consequence, its over-all trade position has become substantially less favorable. It is too early to determine whether the currency readjustments of September 1949, which resulted in an appreciation of the Belgian franc relative to most other European currencies, will bring about a permanent reduction of the Belgian surplus with the other western European countries.

Concerning Belgian inland waterways, the US has encouraged the freeing of Rhine navigation from artificial restraints and national protectionist measures. Toward these ends, the US participates in the work of the provisional Central Rhine Commission, of which Belgium is a member, and has assisted Belgium and Holland, through ECA and the US position in Western Germany, in obtaining increased use of the Low Country ports.

c. relations with other states

Belgium has for centuries been linked to Great Britain by very close economic and strategic ties. Realization of England’s present weakness and disapproval of some of its current economic policies has led Belgium to look increasingly to the US for leadership and assistance. We have no need or desire, however, to elbow Great Britain out of her prominent role in Belgium. The suspension of pound-dollar conversion found Belgium the possessor of many pounds she had received from her European clients which, coupled with her limited ability to purchase from Great Britain, has not improved Anglo-Belgian economic relations.

Although Belgium distrusts certain French machinations in French-speaking Belgium and is critical of French internal and financial policies, Belgium continues to regard its southern neighbor as the parent of its cultural life and an old friend currently undergoing temporary misfortune. Belgium distrusts French efforts to regain the leadership of Western Europe, and Belgian views on Germany are usually closer to those of the United States and the United Kingdom than to those of France.

Belgium’s action in the formation of the Benelux Customs Union with The Netherlands is both the most concrete step and the most newsworthy step taken toward the integration of Europe since the close of hostilities. The Customs Union is now operative and strenuous efforts are in progress to bring an economic union into effect by mid-1950. Belgium has assisted its Benelux partners with generous loans and finds The Netherlands its greatest debtor. Close cooperation among the Benelux countries on political and military as well as economic affairs has been achieved through good will and close consultation at all levels, with Belgium usually supplying the leadership in the formulation of a common foreign policy.

Although having twice suffered invasion and occupation and hating and fearing German imperialism, Belgium regards itself in a sense as Germany’s economic front porch and appreciates its economic dependency upon the latter. Belgium desires political security from Germany, but at the same time understands far better than France the British and American views on German economic rehabilitation While insisting upon firm control of Germany’s war potential, Belgium strongly desires its economic recovery.

Belgium, a tiny and fundamentally conservative country, only some 150 air miles from the Soviet Zone, naturally fears and distrusts the eastern colossus. Belgium has done more than its share toward the establishment of the Western Union. Believing firmly that a strong stand is the only possible course at the present time, Belgium nevertheless places its faith in the United Nations and a strong and unified western community to bring about a more stable peace.

d. policy evaluation

Aside from a minimum effort to assure that our political policy toward Belgium is well understood by its Government and people despite Communist efforts to the contrary, we need do very little work on Belgium. We can accomplish much more by working with that country and encouraging Belgian leadership to achieve our common objectives of integrated and prosperous Western European and North Atlantic communities.

With respect to public opinion there is a feeling in Belgium as regards ERP that their country might have given too much and received too little. There is also, though to a lesser extent than in France and some other countries, an undercurrent of fear lest again Belgium become the battleground of Europe in a war between the East and West. We must stress to the Belgians that United States foreign policy promotes peace and that we are prepared to help defend Western Europe in the event of war. We must therefore continue to interpret to them the significance of ERP, NAT and MDAP.⁵ Today Communist forces are on the defensive in Belgium, but there is no reason to assume that they will remain inactive. Complacency on our part at this stage would be inexcusable.

In the economic sphere we should in general encourage, through technical assistance and otherwise, any Belgian effort directed to expand production, to create more jobs, and to increase the rate of capital formation. The success of Belgium’s fiscal and monetary policies directed toward this end will depend in part upon increasing productivity, lowering prices and expanding the external as well as the internal market.

Economic as well as socio-political considerations indicate that the US should give strong support to the Belgian Government in implementing sound reflationary policies, such as the recently announced public works program, in order to achieve the primary goals of reducing unemployment, utilizing at least part of the existing idle capacity and increasing the rate of capital formation. Although the methods by which such public investment program will be financed are not clear, it seems that its implementation does not require at the present time any outside financial assistance. For this reason the Department has not supported Belgium’s 1949 application for an Export-Import Bank loan of $50 million, desired chiefly to increase foreign exchange reserves as a basis for expansion of local currency circulation. We should, however, be ready to give favorable consideration to Belgian requests for economic assistance from the ECA, from the Export-Import Bank or from the International Bank for Reconstruction and Development, if such requests can be justified on dollar deficit grounds.

There is a possibility that any public works program will not be sufficient to solve the unemployment problem. In fact, it may be questioned whether the industrial and geographic structure of unemployment is not such as to require some readjustments of Belgium’s economic structure, especially in critical sectors such as coal mining, steel and textile industry. If carried too far, the Belgian program might produce inflationary pressures at some points without, at the same time, satisfactorily solving the unemployment problem. Moreover, if the program does result in some inflation, it could hinder a fundamental solution to the unemployment problem, which lies at least in large part in further development of external trade. Insofar as high Belgian prices now prevent further exports, any price rise (due to internal spending or to any other reason) can only reduce exports. The US, especially through its ECA Mission in Belgium, should follow closely the developments in all sectors of the Belgian economy which can be considered as “critical”. Technical assistance may be used in increasing productivity and in analyzing critical sectors and new industries.

The long-term solution of Belgium’s basic economic problems appears to rest chiefly in higher activity in its export industries and in a reorientation of its trade pattern. Since an expanding world trade is of major importance to its prosperity, Belgium can identify a major objective of its foreign economic policy with those of the US in this field. The US should continue to support vigorously all Belgian efforts toward any trade or payment liberalization scheme within the framework of OEEC, GATT and ITO. In addition, we should continue to impress on the Belgian Government that for achievement of viability after 1952 a reorientation of the Belgian trade pattern seems indispensable. The Belgian long-term program, based on free convertibility of European currency surplus into dollars, seems to be based on Belgium’s unwillingness to accept Europe’s changed position in the world economy as permanent rather than temporary. It can be assumed that only a part of Belgium’s prewar pattern of trade can be restored on a permanent and sound economic basis through European recovery, since it is unlikely that hard currencies will be available in Europe in prewar amounts in the foreseeable future. The US, therefore, should press the Belgian Government for vigorous action required to make the necessary trading adjustments in order to achieve a reduction of its European trade surplus and a diminution of its Western Hemisphere deficit through increased exports to the dollar area, and through shifts in sources of supply for foodstuffs and raw materials. The implementation of the new intra-European payments system,⁶ and possibly of the new system for allocating ECA aid in FY 1951 and FY 1952, may provide the US with adequate means to give concrete support to the Belgian Government’s efforts in achieving such trading adjustments.

To increase its exports, especially to the dollar area, Belgium must increase its efforts toward lower costs, i. e., greater productivity. The US will continue to give full support to these efforts, chiefly through the ECA technical assistance program.

We should also encourage the Belgian Government to press forward with the realization of Benelux as a full economic union (including the free flow of agricultural commodities within the union) which will give Belgium the advantages deriving from a partnership in one of the largest trading areas in the postwar world, next only to the US and to the sterling areas. The US should also support Belgium’s active participation in any European payments scheme established within the framework of the OEEC, should this take the form of a European Payments Union including all Western European countries, or of a smaller area of liberalized trade and payments, such as FINEBEL.

A more aggressive attack should be made by the Belgian Government on cartels and other restrictive practices which inhibit output and investment in some lines. Although Belgian industrialists often realize the need for modernization and re-equipment in order to compete more favorably on the foreign market, a partial offset to this is a general feeling that competition in foreign markets will not be allowed because of protectionist or other nationalistic policies, leading to a desire on the part of Belgian producers to make “arrangements” with other producers which would in effect reduce both production and investment. The US should support any action taken by the Belgian Government to combat these tendencies, in accordance with ITO and GATT principles. Also, the US should continue to press the Belgian Government to secure more complete cooperation in the implementation of the East-West trade controls.

In addition, the Belgian Government should be encouraged to complete its study of the draft treaty of friendship, commerce and navigation (proposed by the United States in mid-1948) and to agree on a time for the holding of negotiations in the early future. It is believed that once initiated the negotiations could proceed relatively free from difficult issues.

1. Policy statements on various countries were prepared periodically in the Department of State and updated every year or two. There is no record in the files of the Department of State of a previous statement on Belgium or Luxembourg. Copies of the source text were sent to 10 posts in Western Europe and to Moscow, Léopoldville, and the United States Mission at the United Nations. For documentation on Belgian participation in the North Atlantic Treaty Organization, see pp. 1 ff.
2. Documentation on the return of King Leopold III to Belgium and his delegation of constitutional powers to Prince Baudouin is in files 755.00 and 755.11.
3. Documentation on United States-Belgian talks on the colonial question is in files 320 and 350; documentation relating to the defense of the Belgian Congo and the development of its strategic materials is in files 755A.5, 855A.254, and 855A.2546. For documentation on the discussion of the colonial question at the London Foreign Ministers meeting, May 11–13, see pp. 948 ff.; for documentation on the colonial question at the United Nations in 1950, see vol. ii, pp. 434 ff.
4. For documentation on Belgian participation in the European Recovery Program (ERP) and the Organization of European Economic Cooperation (OEEC), see pp. 1357 ff.
5. On January 27 the United States and Belgium had signed a Mutual Defense Assistance Agreement. For the text of this agreement, see Treaties and Other International Acts Series (TIAS) No. 2010. Documentation relating to the negotiation of this agreement is in file 755.5 MAP.
6. For documentation relating to the European Payments Union (EPU), see pp. 611 ff.