The Secretary of State to the United States Delegation at the Intergovernmental Study Group on Germany, at London1
Tosig 274. 1. We realize that PLI negots have been complicated by separate negots on Schuman Plan and defense arrangements as reported [Page 786] Sigto 268.2 This msg will put forward our ideas on phasing of relaxation security controls.
2. We see three separate phases. First phase is current situation in which defense arrangements still up in air. Second phase starts after defense arrangements resolved and Ger agrees to contribute mil units to Eur defense forces. Third phase in indefinite future when Ger securely tied-in with West and no longer a potential security threat.
3. We are hopeful that negots on Schuman Plan and defense talks on bringing Germany into Western defense arrangements will be successfully concluded in reasonably near future. If so phase one shld be only brief interim period.
4. On other hand, these arrangements will not in themselves in Fr eyes at least make Ger adherence to the West secure and therefore Fr will be reluctant to agree to Ger armed forces except on basis controls under PLI Agmt which wld deprive new Ger forces of independent source of supply of selected key types of war material.
5. In our view phase 2 controls wld be subj to periodic review and relaxation if as we hope Ger progressively becomes further integrated with Western Eur. We presently envisage however retention hard core of controls over Ger in selected fields including aviation, submarines, atomic energy and special weapons during entire phase 2 and probably even in third phase although obviously until phase three defined more specifically we can not determine what controls feasible or necessary. We agree that gradual relaxation during phase 2 must be done in such way as not alarm Fr or mislead Gers as to firmness of our purpose as suggested Sigto 2193 but on other hand rigidities in this field may prove equally dangerous to our interests.
6. We shld take care distinguish between first, second, and third phases. (Also important to realize that phase II composed of several stages.) In order obtain Fr consent to adequate discussion second phase once Ger participation in NATO defense organization has been agreed by NATO & Gers it will be necessary agree to reasonable limitations and prohibitions on Ger production selected key military end use items in support of Ger armed forces. In any case we envisage controls considerably in excess of “hard core” referred to above during initial stages phase 2.
7. We are now undertaking review Sched A of PLI Agmt in anticipation that second phase may begin at any time in near future. We propose in particular to define what we have meant in proposals to Fr that Ger production be restricted to “light” weapons. We expect send proposed revision to you shortly, as you requested Sigto 273.[Page 787]
8. At present we are in first phase and our instructions were intended to secure relaxations which cld be reasonably made before decisions reached on Schuman Plan and defense arrangements. In Tosig 2474 we broadened instructions in light ur judgment that Fr and Brit prepared at this time go much farther than we anticipated.
9. If further delays shld develop, agree Sigto 2424 that recommendations shld be on interim basis only. We are now running into various problems in which current provisions PLI are interfering with urgent defense needs. Msg referred to in Tosig 243  indicates possible need for rapid decision on aluminum capacity. Understand substantial orders for critical items, in particular fire control devices, are also ready to be placed by MDAP as soon as prohibitions in Group III of Sched A lifted. If agreement not reached in reasonably near future it may be desirable press for prompt interim Agmt on critical items.
10. We have noted ur frequent references to coal and coke supplies as possible key to Fr agmt on relaxation controls. We had assumed here that IAR Agmt meets situation now, and Schuman Plan when adopted wld resolve problem in future, particularly since powers of Schuman Plan auth wld be sufficient to protect coal and coke requirements of steel industry. Wld apprec any further info you have on possible Fr intentions. Sigto 313 and Sigto 314 just recd.5 Will reply soonest.
- Repeated to Frankfort as 3894 and to Paris as 2947.↩
- Not printed; in it Douglas expressed his regret that he had been unable to obtain agreement on the steel problem and other aspects of the PLI, but hoped that when the French delegation returned from Paris, the discussions would move ahead. (CFM Files: Lot M–88: Box 200: ISG Cables 3rd Session 1950 volume ii )↩
- Not printed.↩
- Not printed.↩
- Not printed.↩
- Neither printed; in the former, Holmes stated his belief that “the stage has now been reached at which we must move to bring the PLI negotiations to a head;” while in the latter, he reported his feeling that it would be a mistake to discuss German arms production since the United States was “still not ready to take position on subject” and the question was “being discussed in NATO and taking it up in both discussions would be likely to get us into trouble.” (396.1–ISG/11–2750)↩