396.1–ISG/8–2550: Telegram

The United States Delegation at the Intergovernmental Study Group on Germany to the Secretary of State


Sigto 123. Sigto 105.1 At request British informal meeting ISG held August 23, to consider US PLI paper. Reinstein represented US and Stevens and Beaumarchais UK and French respectively. French explained their instructions were to listen but not participate in discussions, and to enter reservation French Government against inclusion reference PLI report ISG since not covered in agreed terms of reference. US representative did not introduce details US position set forth Tosig 70.2 In opening statement he recalled subject having [Page 763] been raised May meeting Foreign Ministers and suggestion made at that time that since occupation powers contemplated new phase in their relations with Germans, desirable to look at PLI in that context as well as in light their experience operation of restrictions. Two basic problems appear involved. First, controls may be too complex and as result Allies in danger expending energies on details unit administration and losing sight main objectives. In US view certain controls and administrative practices can be restricted or eliminated, some controls appear unduly burdensome on both occupation authorities and Germans, and some seem unnecessary. Secondly there is problem of Western defense program which would have impact on economies of countries concerned. Goods will be needed for both civilian and military purposes and as consequence period of stress and strain envisaged. Full impact cannot yet be determined. It would seem unwise, however, for allies to deny themselves productive possibilities in Germany of goods required for civilian economy and defense needs. US not proposing production military equipment in Germany but of goods of different character. US he continued feels controls should not be so rigid as to require specific authorization of Foreign Ministers in each instance to obtain any relaxation. It therefore proposed that Foreign Ministers should charge ISG or some other body with responsibility of reviewing controls under PLI in accordance with provisions of principles Foreign Ministers themselves might determine.

UK representative said that speaking personally he was broadly in agreement with a great deal US representative had said and in suggestions underlying US paper. Change international situation required restudy of PLI. Time necessary to do this and he seriously doubted whether work could be performed in second phase ISG. Agreement should, however, be reached at least by end of year and if any substantial modifications agreed to, they should be “wrapped up in same package” with relaxation in occupation statute “so that Germans would be no doubt re our policy”. He also agreed Foreign Ministers should lay down principles but considered task of formulating them “formidable”. Foreign Ministers would need more information than that contained US paper since they must have idea where principles would lead them. Otherwise they might be in position of signing “blank check”, and of adopting words might later be used against them in manner not intended. As he saw it modifications proposed by US were of three types: (a) those resulting from changes in concept re security, (b) controls which MSB or other pertinent Allied organizations in Germany have found impractical to carry out, (c) granting greater discretion to HICOM to restrictions in interest production non-ordnance items. He was not sure re desirability action under (c) since HICOM would not have access to information requirements and therefore suggested governments now agree quotas [Page 764] certain type of material which could be produced outside of quota if needed for common defense. Another possibility would be agreement that NATO requirements body, if and when established, should determine from time to time what might be required from Germany, and HICOM could then have power to modify PLI restrictions accordingly.

US representative said impossible to determine requirements at this stage. Generally speaking, problem might arise in two ways: (a) direct procurement non-military materials for use by military; (b) steps to be taken to increase availability of particular items in short supply required for civilian and military use. He emphasized Western powers must contemplate increase above present high level production and that as result shortages would undoubtedly develop.

UK representative agreed that “some simple remedial action” to combat shortages should be provided for, but still questioned whether HICOM would be in position to determine supply needs under defense program in absence precise instructions on subject from “some competent body”. UK representative then asked what controls US considers “unduly restrictive”.

US representative replied that he had in mind those concerned with (a) shipbuilding and in particular ships for export (b) leaving aside for moment question steel, capacity limitations on certain industries remaining after reparations removal such as those on synthetic ammonia (c) overly restrictive regulations relating to items such as electronic tubes and (d) in general controls not directly connected with essential security considerations.

UK representative replied that Allies must look to all restrictions in sight new concept re security in past 18 months. He had nothing new to say re shipbuilding except that it would be examined in this “wider concept”. He suggested that further meeting be held with view to drawing up report to Ministers. Report would preferably be tripartite but if French unwilling to associate themselves, it might go forward as joint US–UK paper.

At conclusion meeting US representative said he had certain views to put forward on steel which represented most important problem, mentioning in this connection current high rate production in Germany, extremely tight situation in US and growing defense requirements. At suggestion British general discussion steel question postponed until further meeting.

During course discussions Stevens said he had been given assignment outside regular work on German affairs to participate in planning re NATO requirements and procurement. In this connection and in view US suggestion that Germany be allowed produce for common [Page 765] defense, he was curious to know what US views were as to how German contributions to common defense would be financed.3

Sent Department Sigto 123, repeated information Frankfort 164, Paris 306.

  1. Not printed; it reported that the U.S. delegation had circulated at the 15th Deputies meeting on August 19, a statement on the need to revise the PLI and the principles to be applied in such a revision. (396.1–ISG/8–1950) A copy of this statement (IGG(50)71) and the U.S. delegation minutes of the 15th meeting are in CFM Files: Lot M–88: Boxes 196 and 198: IGG(50)70–99 and USDel–ISG(50) Deputy Meetings 15, respectively.
  2. Not printed, but see footnote 4, supra.
  3. On August 29 at the 6th plenary meeting Douglas reiterated the United States position on revision of the PLI Agreement, and again at an informal session following the meeting. The French however were still without instructions, while Stevens reported that the British would be unable to discuss the subject until the Cabinet took its position. Sigto 138, August 30, from London, not printed (396.1–ISG/8–3050).