No. 187

Secretary’s Memoranda, lot 53D444, Memoranda of conversation

Memorandum of Conversation, by the Acting Secretary of State
confidential

Subject: French Economic Situation.

Participants: Mr. Daridan, Minister Counselor, French Embassy
Mr. Francfort, Counselor, French Embassy
The Acting Secretary
Mr. Beigel, WE

Mr. Daridan handed me an aide-mémoire (copy attached) about the French import program. He explained in detail the reductions in imports that would be required if the French Government received no assurances about the level of dollar aid in 1951/52. He said that he was not informed about the timing of the proposed measures.

I indicated that the interested agencies are giving serious attention to the French situation and that we would study carefully the aide-mémoire. I said that we hope to begin bilateral talks in Paris next week, during which we expect to work out an interim aid allotment for France.

James E. Webb
[Enclosure]
confidential
Aide-Mémoire 1

As indicated in the letter from Rene Mayer to Mr. Harriman, dated October 22, 1951,2 in the absence of any definite assurances with regard to the dollar aid that will be available from the US Government during 1951/52, the French Government has decided to establish a reduced program of dollar imports.

This program is based on the assumption that the dollar resources available for imports and freight will amount to $500 million, made up as follows: $200 million in economic aid; and $300 million from visible and invisible exports of the franc zone, plus the drawing down of dollar reserves which are already dangerously [Page 436] reduced, after taking into account dollar expenditures for other than imports and freight.

In establishing this emergency program, it has been necessary to take into account funds already obligated. In fact, during the first four months of 1951/52 the French Government has taken the risk of maintaining imports from the dollar area at the 1950/51 rate, which involves annual expenditures on the order of $850 million. It is necessary therefore to deduct from the emergency program the obligations undertaken since June 30, which amount to about $230 million. Only $270 million therefore will remain for the last eight months of 1951/52. Of this amount, it is necessary first to deduct $80 million (of which $15 million for freight) to cover various requirements of the Metropole and the indispensable needs of the overseas territories. Reductions in this category appear practically impossible. There will remain therefore $190 million, out of which the French Government must finance supplies of cotton, wheat, copper, equipment, coal and petroleum products, and freight charges thereon.

(A)
With regard to cotton, requirements amount to $50 million dollars, but the French Government hopes to arrive at an agreement with the Export-Import Bank for a loan of this amount. No amount for cotton is included therefore in the $190 million.
(B)
With regard to wheat, the requirements established by the National Wheat Office amount to $100 million. The Ministry of Finance and Economic Affairs believes that this amount can be reduced to $52 million, provided that we are able to obtain 200,000 tons from Eastern Europe, as well as run the risk of reducing our stocks to four weeks consumption requirements instead of six weeks. Even if these conditions are realized, it may be necessary to increase the rate of extraction.
(C)
With regard to copper, the initial program was for $42 million, of which $15 million has already been spent. If we do not maintain intact the remainder of this amount ($27 million) we will not be able to acquire the amount of copper, already insufficient for our needs, which may be available to us. This will lead to serious difficulties, notably with regard to military production, and will require further restrictions on copper consumption.
(D)
With regard to military requirements, roughly estimated at $19 million (of which about a third represents petroleum products), $4 million has already been obligated. The possibility of further reductions in the remaining $15 million appears slim.
(E)
With regard to civil equipment, the credits requested by the Minister of Industry and the Ministry of Public Works totalled about $100 million. In eliminating all new orders for equipment, and in limiting imports to indispensable spare parts and to the completion of the Sollac rolling mill, this amount can be reduced to $44 million.
(F)
With regard to coal and petroleum, $270 million was requested in the original program. It is necessary to reduce this amount [Page 437] by 50 percent. This assumes that there will be no further imports of American coal after December 31, 1951. With regard to petroleum, our supplies from the dollar zone (which represent 50 percent of our total imports) will also be suspended after that date. Imports of petroleum products must henceforth be provided from sources other than the dollar zone. As of December 31, stocks will be insufficient to assure a regular supply for consumption, and the reinstitution of rationing is imminent.

It is unnecessary to emphasize the serious consequences which will follow the application of such a program, even if the optimistic assumptions on which it is based, in particular with regard to cotton and wheat, are realized. The fuel restrictions which will be required (with regard to coal and petroleum) are such that national industrial and agricultural activity, and consequently the defense effort, will be seriously compromised. With the best possible assumptions, the French economy will not be able to reach equilibrium except at a sharply reduced level of activity, and the increase in production foreseen in the OEEC Ministerial Declaration will be impossible.3 The equilibrium in public finances will become still more difficult in 1952, as a result of this generally lower level of activity, and the consequent reduction in Treasury receipts.

  1. The source text identifies this as an informal translation.
  2. No such letter has been found in Department of State files. Presumably the reference is to Mayer’s letter to Harriman transmitted to Washington on October 25 in telegram Toeca 1335, Document 184.
  3. Regarding the OEEC Ministerial Declaration of August 29, see Documents 23 and 24.