396.1–ISG/10–2750: Telegram
The United States Delegation at the Intergovernmental Study Group on Germany to the Secretary of State
Sigto 205. Heads of delegations met informally today to discuss French note PLI.1
Massigli presented French position as stated note, emphasizing that principles a and b Ministers’ decision which would be relatively simple to deal with, require report from HICOM while principle c depends on completion NATO programs. Douglas pointed out Ministers directed ISG proceed to review PLI “as soon as possible” reporting first December. Steel formula, he said, is interim arrangement and steel limitations review is necessary particularly because interim arrangement already seems to be difficult to apply in practice.
Gainer agreed Douglas statement. He added that UK believes all three principles have equal priority and equal importance and Ministers’ directive requires action on them together.
Douglas pointed out that the NATO estimates when completed would deal only with military end products and urged that ISG proceed in order to take action which would assist in meeting the German need for more exports to improve the German trade balance and the US inflationary situation which results, in part at least, from the steel shortage. He pointed out also that it would be extremely difficult to determine under the NY formula what steel went into defense in view of the possibility that German steel would be substituted for domestically produced steel in civilian products, thus releasing steel for defense needs.
[Page 776]Massigli said he would recommend to Paris that ISG deal with matters arising under principles a and b but that Schuman had understood the NY decision to mean that the ceiling would be maintained while production in excess of the ceiling was to be authorized by HICOM provided it was used for the common defense. He said that Schuman had understood that his concept would be continued in any recommendations made by ISG and asked if, on the contrary, the US and UK delegations expected to fix a new ceiling or eliminate the ceiling entirely.
Douglas replied this issue was not relevant to today’s discussion, the question being were we going directly to work. He pointed out we were not dealing at this time with ordnance requirements but were to recommend action with respect to primary materials by December 1. As to the US position on steel production, he said US believed it was necessary to permit production of crude steel within the limits of existing capacity, subject to the equitable distribution of coal, coke, scrap and iron ore.
Gainer supported Douglas statement adding that it is necessary to prepare, by revising PLI, for German contribution to Western defense and that essential preliminary decisions must be taken in advance of decisions by NATO as to our specific requirements of Germany. NATO programs will not be final but will be continually revised. Provision for dealing with supplementary problems can be made by authorizing HICOM to act.
Massigli referred again to Schuman’s understanding that the interim formula on steel would be incorporated in any ISG recommendations. Douglas and Gainer replied that the ISG was under instructions to review this and other limitations as a whole in the light of all 3 Foreign Minister’s principles. They pointed out the immediate question was whether to proceed as instructed by the Ministers. Massigli said he would recommend to Paris that he be instructed to proceed on principles a and b and ask for instruction without making any recommendation on principle c He referred to the possibility of asking HICOM for a report on administrative difficulties in MSB but it was agreed to leave this matter in abeyance until he has received instructions from Paris.
We see no necessity for a report from HICOM preparation of which would delay discussion here and will suggest that this problem can be met by bringing HICOM experts to London (the US expert is already with us). It seems likely that substantive discussions on PLI will begin about the middle of the coming week.
Sent Department Sigto 205; repeated Frankfort 295, Paris 723.