396.1–ISG/2–2151: Telegram

The United States Delegation at the Intergovernmental Study Group on Germany to the Secretary of State 1

secret

Sigto 458. At steering committee meeting February 20 British introduced general proposal regarding revision PLI agreement in two phases.

First phase would involve removal of restrictions which no longer justified on security grounds, which British consider to be all prohibitions and limitations except those re Schedule A and atomic energy, steel capacity, shipbuilding capacity, and certain electronic valves. Some modification of policy on electronic valves would be involved, and remaining capacity limits would, be administered in manner proposed by British in December.

These prohibitions and limitations would be removed at early date to be determined by HICOM, irrespective of state of negotiations with Germans regarding defense contribution or any other subject. Determination by HICOM would be based on short-term tactical considerations only; effective date would not be delayed beyond date to be specified, perhaps one month after agreement reached.

Phase two would be reached when firm and satisfactory agreement reached on Germany’s contribution to defense. At this time, further modifications of agreement would be made effective. Specific nature of further modifications for discussion in light of anticipated contractual [Page 1364] relationship, under which removal of controls would be to large extent inevitable. HICOM could, indicate to Germans in course of negotiations on German contribution2 that satisfactory agreement would lead to further removal of industrial controls.3

When Reinstein pointed out inconsistency of indefinite British position regarding phase two with Brussels, Stevens said British delegate not yet in position to state precisely what limitations can be removed in phase two. However, British delegate does propose reach precise and definite agreement on this during present negotiations, since further review should be avoided and since such agreement necessary as satisfactory basis for HICOM negotiations with Germans. Stevens intimated that British will probably agree to elimination steel and shipbuilding capacity limits, but simply have not yet cleared this position within British Government.

Reinstein agreed study proposal since British had met second condition he had stated (Sigto 4514) and agreed to first.

Gillet stated phase one relaxations too extensive, doubted phase two relaxations could be determined in advance of agreement on German contribution. He agreed transmit proposal to Paris but apparently had no hope it could be accepted.

Committee discussed white phosphorous and liquid oxygen. Consensus, subject to confirmation by French, that white phosphorous could be deleted from Schedule A when Schedule revised but that liquid oxygen should remain.5

Agreed letter should be written to MSB advising that word “acquire” in PLI agreement approved by governments specifically covers ship chartering.

  1. Repeated to Frankfurt and Paris.
  2. For documentation on talks at Bonn between the Allied High Commission and representatives of the Federal Republic concerning West German contribution to the defense of Europe, see pp. 990 ff.
  3. The British proposal was circulated as IGG/P(51)20, dated February 19 (CFM files, lot M–88, box 196, IGG/P 19511–59).
  4. Dated February 16, p. 1360.
  5. On February 28 the U.S. Delegation reported that the French would not agree to the deletion of white phosphorus from Schedule A. Sigto 481, February 28, from London (396.1–ISG/2–2851).