Secretary’s Memoranda, lot 53D444,
Memoranda of conversation
Subject: French Economic Situation.
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.
[Enclosure]
confidential
Washington,
November 2, 1951.
Aide-Mémoire1
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
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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.
