Foreign Relations of the United States, 1950, Central and Eastern Europe; The Soviet Union, Volume IV

396.1 LO/5–450: Telegram

The Ambassador in the United Kingdom (Douglas) to the Secretary of State

secret

London, May 4, 1950—3 p. m.

Secto 122. Sectos 92 and 104 May 3.

1. Further mtg sub-group on Ger econ questions held at FonOff afternoon May 3.¹

[Here follow four paragraphs reporting on the discussion of Berlin’s economic problems.]

6. Leroy-Beaulieu² again raised question East-West trade as relating to Ger (Secto 104) and expressed concern that Amer list which US has imposed on Gers re exports to East more restrictive than Internatl list followed by other OEEC countries. Stevens³ said that before commenting on this observation, he wld like to speak in “broader perspective”. Brit he contd have been thinking of “optimum level” Ger trade with East in next few years and in this connection cited statistic showing sharp drop current trade as compared with prewar level. It was he considered essential that Ger trade with East Eur be increased altho care shld be taken that it not exceed danger point where West Ger wld be unduly dependent on Eastern Eur for essential supplies of foodstuffs and raw materials. “Practical question was what cld be done in practice to step up volume West Ger-East Eur trade without involving security dangers”. First thing he thought shld be to place Ger on basis equality with other OEEC countries so far as restrictions on trade concerned. On assumption we can agree that this “discrimination” is to be removed, we shld next consider what “positive advice” HICOM might give Gers re negot of trade agreement with Satellites. Alphand⁴ argued on much same lines, asserting econ situation in Ger cannot be improved without increased trade with East and pointing out fact that nearly 20% Ger prewar trade had been with that area.

7. Reinstein⁵ agreed that trade with East Eur was important factor Ger economy. Nevertheless we shld not concentrate on that area alone. Trade with Latin Amer and US had also been important prewar period, but today representated only “infinitesimal fraction” of what it had been. There were many factors which accounted for Gers failure to increase exports including ineptitude and lack of interest on part Ger exporters to develop markets. These points wld have to be driven home to Ger authorities. Moreover it was his understanding that we have been pressing Ger to export more to Satellites and to get more from them. Reinstein also expressed opinion that question of discrimination against Gers as regards exports to East was being considered at Paris and intimated that this was not appropriate forum for discussion.

8. Stevens inquired as to financial basis of Fed Rep trade agreements with Satellites, and after Marshall⁶ had replied that they were being carried out on usual offset account principle, suggested desirability requiring settlement balances in sterling instead of dollars.

9. After further discussion discrimination issue in which UK and Fr pressed strongly for removal, Stevens proposed that report be submitted to Mins covering fol points:

(a) West Gers econ difficulties greatly enhanced by loss of markets and hence every effort shld be made to expand exports.

(b) Ger shld not be discriminated against as regards list of products with which it can trade with Eastern Eur.

(c) Bearing in mind security considerations, HICOM shld advise Gers as to ways and means by which they might stimulate trade with East. Reinstein replied that we wld like to consider matter further. It was therefore agreed that Brit shld put their proposals in writing.⁷

10. Subsequent discussion which related to IAR and steel summarized in separate msg.

(Sent Dept Secto 122; rptd Frankfurt 198, Paris 734.)

Douglas

1. The meeting reported upon here was one of a series of trilateral (American-British-French) meetings held in London in preparation for the Tripartite Foreign Ministers meetings, May 11–13. For documentation on these meetings, see vol. iii, pp. 828 ff.
2. Paul Leroy Beaulieu, Financial Counselor of the French High Commissioner for Germany.
3. Roger Bentham Stevens, Assistant Under Secretary of State (German Economic Affairs), British Foreign Office.
4. Hervé Alphand, Director General for Economic, Financial, and Technical Affairs, French Foreign Ministry.
5. Jacques J. Reinstein, Director, Office of German Economic Affairs, Department of State.
6. Charles E. Marshall, Economics Commissioner, Office of Economic Affairs, Office of the U.S. High Commissioner for Germany; Deputy Chief of the Economic Cooperation Administration Mission in Germany.
7. An agreed British-French position, along the lines set forth in subparagraphs a–c of this telegram, was subsequently circulated at the Tripartite Foreign Ministers meetings as document MIN/TRI/P/16, May 7, not printed. For a summary of the discussion of the paper by the Foreign Ministers, see the final paragraph of the undated memorandum by Martin, p. 123.