396.1–ISG/2–1651: Telegram
The United States Delegation at the Intergovernmental Study Group on Germany to the Secretary of State 1
Sigto 451. Steering committee discussed US proposal PLI February 15. British stated could not accept US proposals and proposed as alternative revision PLI agreement in two stages: (1) relaxations they proposed in third phase ISG, as modified by concessions they were willing make to French position then, to be effective at earliest appropriate time, (2) further relaxation to be effective when decision taken on German contribution to defense. This time defined as when necessary legislation passed by Bundestag and agreement with Germans being implemented. Two stages would correspond approximately to two stages contemplated re authorization production schedule A items [Page 1361] (Sigto 4842). British would be prepared consider sympathetically removal of steel and shipbuilding capacity limits as part of second stage.
British argued steel and shipbuilding capacity limits should not be lifted prior to decision on German contribution because presence of sufficient armed force necessary to avoid security risk of increased capacity and German force best means to this end.
French stated US proposal totally unacceptable. Willing discuss relaxations subject two conditions: (a) steel production to be discussed only when agreement reached on coke, (b) agreement to be turned over to HICOM to be made effective when HICOM sees fit. HICOM would use relaxations as means of bargaining with Germans and date when Agreement made effective would depend on course of negotiations with Germans. Gillet indicated he would be willing refer British proposal to Paris, but he had no hope at all that it could be accepted.
Reinstein argued US position strongly, urging necessity of removing barriers to Western defense effort at earliest possible time. Reviewed efforts of US to obtain review PLI beginning last summer. Foreign Ministers in September directed ISG to proceed soon as possible with review and assignment of review to ISG had been publicly announced, but French had gone back on this agreement and even now do nothing but think of reasons for delay, i.e. Schuman Plan, coke, German participation in defense. US had indicated willingness consider timing of relaxation steel limits which would avoid prejudice to success of Schuman Plan negotiations. US regards review as urgent due to supply considerations as well as for other reasons. Stressed need for modernization German steel finishing capacity, which insufficient and obsolete, and need for products in short supply regardless of question of German participation.
Reinstein finally indicated willingness explore problem on basis British proposal subject two conditions:
- (1)
- That specific products must be discussed, e.g., British proposal not satisfactory re steel finishing capacity,
- (2)
- Agreement must include significant relaxations to be effective immediately.
British firmly rejected French concept of timing, agreeing with US relaxations should be made effective in immediate future though HICOM would determine precise time of announcement. Stevens mentioned as one argument against French concept of timing that agreement with Germans on participation in defense might be long delayed. He also stated among other examples of restrictions which should be relaxed, that there should be more permanent arrangements re steel production.
[Page 1362]French have not stated precisely what relaxations they will accept, even subject to condition re timing, though Gillet indicated belief agreement could be reached on basis compromise he believes he could have worked out in December had he been permitted to do so. British undertdok to put their proposal in writing to be discussed by Steering committee next week.
Schedule A discussed separate telegram.3