611.52/2–651
The Secretary of State to the Ambassador-Designate to Spain (Griffis), at Washington1
Sir: The policy of the United States toward Spain is now under active study, particularly in the military field. I would like to inform you, prior to your departure for Madrid, of the developments which have taken place since I outlined our Spanish policy in my letter to Senator Connally of January 18, 1950.2 When the present study has been completed you will receive further information and instructions from the Department.
We fully realize that the gravity of the international situation emphasizes the desirability of including Spain in the common defense effort as soon as possible because of the contributions which Spain could make. At the same time, this is a matter which must be considered in the context of our over-all objectives and our relations with other European states. It obviously would not be to our interest to take hasty action with regard to Spain which would have an adverse effect on the development of the common defense under the North Atlantic Treaty. However, there has been a noticeable change of attitude in Western Europe with regard to Spain within the last year or two and we expect to move ahead on the integration of Spain into our joint security efforts just as fast as we can. In general, the criterion we will follow will be whether a given action at a given time will have the effect of strengthening or weakening our combined abilities to resist aggression.
One of our first objectives is to promote the inclusion of Spain in the Western European community. Besides the obvious advantages that would accrue to Spain from normal relations with its neighbors, progress along these lines will clear the way for Spanish participation in the joint defense effort. There are a number of ways in which you can contribute to progress toward this objective.
In discussing this and other matters with Spanish officials, you may indicate our disposition to work out mutual problems in a spirit of cooperation based upon the recognition of our common interest as members of the Western World. At the same time it is [Page 792] important that the Spanish people, many of whom are not in sympathy with the Government, should not lose their overwhelmingly favorable disposition toward the United States or their belief that their interest and welfare are associated with this country. Particular attention should be paid to this matter and such steps and precautions as are possible should be taken to retain the good will of the Spanish people for the United States in the event that more cordial official relations should adversely affect their present attitude.
First, you may point out to responsible Spanish officials that it is to Spain’s interest to establish friendly relations with its Western European neighbors; and that attacks by Spanish officials and editorial invective by the Spanish radio and press, which are under government control, do not serve this interest. These attacks, centering upon the British and French and to a lesser extent upon the other Western European democracies, are also directed at important organizations of which these countries and we are members, such as the NATO, OEEC and the UN. A more positive Spanish approach in this regard would be one of the prerequisites to the development of normal relations between Spain and its neighbors.
Second, you may point out that attempts to drive a wedge between the United States on the one hand and its principal European allies—the United Kingdom and France—are likewise ill-advised and unproductive. It is understandable that the Spanish Government should wish to emphasize Spain’s military value, but its recent and repeated allegations regarding the unreliability of France as an ally and the duplicity of the Labor Government in Great Britain are not likely either to weaken United States support for the NATO, promote a bilateral defense agreement with the United States or contribute to the defensive strength of Western Europe.
Third, it may be possible to work toward our objective through the ranking diplomatic representatives of Western European countries stationed in Madrid, by emphasizing the desirability of hastening Spain’s entry into the Western European community and by enlisting their support in eliminating provocations of the Spanish Government by officials of their own countries.
The USIE program should help to promote this objective. I hope that you will consider ways this program can best be used to reduce the extreme isolation of Spain and dispel the ignorance and misconception of the rest of the world which is characteristic of most Spaniards. This ignorance and misconception of the world beyond the Pyrenees, attributable to a large extent to the design of the Spanish Government, is a barrier to Spain’s integration into Western Europe since it can be exploited to provide a considerable amount of popular support for official policies of hostility toward certain countries. The USIE can also play an extremely important role, not only by explaining and gaining support for United States [Page 793] policies and institutions, but also by educating Spaniards about techniques and institutions which could assist in the economic reconstruction of Spain and in the long-term development of a stable, democratic government.
With regard to economic relations, we desire to facilitate normal business and trade between the United States and Spain. My letter to Senator Connally emphasized that the development of mutually beneficial economic relations also depends on the cooperation of the Spanish Government. We have observed, in this connection, that the present critical situation in the Spanish dollar balance of payments seems to derive from difficulties, many of which could he substantially rectified by action of the Spanish Government. The current provision of Export-Import Bank assistance to Spain may serve to improve considerably the Spanish dollar position, and may thereby improve our bargaining position in further negotiations with the Spanish Government on economic matters. Among the subjects which you may discuss with Spanish officials in this regard are:
1. The present limitation on the participation of foreign investors in any Spanish enterprise to 25 percent of the capitalization of the enterprise, and restrictions on foreign management in corporations established in Spain. Sixty United States corporations have reported investments in Spain, and most of these companies are precluded by existing legislation from expanding their interests. The only significant increase in United States equity interests in Spain since the war was in October 1948, when Caltex received 24 percent of the stock in the new Cartagena oil refinery in return for a loan of $8 million.
2. The inability of United States companies to convert local currency earnings. Such blocked peseta accounts presently aggregate the equivalent of $10–15 million and are increasing at the rate of about $3–4 million a year. The likelihood that the Spanish Government will permit the transfer of these balances is directly related to improvements in Spain’s dollar position. However, the Spanish Government generally has denied dollar exchange even to those United States companies whose exports generate dollar resources for Spain. Unlike many other countries with investments in Spain, the United States does not engage in bilateral trade and payments agreements, and is unable to use this device to negotiate the transfer of blocked earnings.
In addition to the above matters, the Department has formally maintained to the Spanish Government, during the past two years, that the treatment which has been accorded to the subsidiaries of the Barcelona Traction, Light and Power Company (a Canadian corporation in which United States citizens hold small equity interests) has generally tended to lessen confidence in the security of foreign investments in Spain. The United States position in this case has been based on the general principle of encouraging foreign investment. The actual facts surrounding this corporation’s investments [Page 794] in Spain are extremely complex and are presently the subject of an officially sponsored inquiry by Spain, Canada and the United Kingdom.
3. The obstacles to trade created by the complex and often arbitrarily administered export-import controls and multiple exchange rate system, and by the unfair treatment occasionally accorded existing United States corporations with regard to imports of raw materials used in their business.
In addition, the total network of economic controls in Spain, the uncertainties arising out of such matters as changing exchange rates and trade controls, and the extensive interference of governmental authorities, including the syndicates, into ordinary business transactions, serve generally to discourage United States enterprises from investing or even doing business in Spain.
The multiple exchange rate system, adopted by the Spanish Government in 1948, continues to price many Spanish products out of the United States market. The multiple rate procedure and such devices as the retention of variable percentages of foreign exchange by exporters have made trading with Spain uncertain and complex. The multiple exchange rate system was partially responsible for retaliatory action by the United States in the application of a countervailing duty on Spanish almond exports. The recent removal of this duty which had been continually protested during its two-year duration by the Spanish authorities, should improve our position in further discussions of our economic relations with Spain.
You may also raise the question of a new Treaty of Friendship, Commerce and Navigation which was offered by the United States in April, 1949, to assist in the development of improved and mutually beneficial economic relations between the two countries. To date the Spanish Government has shown little interest in this proposal, although they have stated that it is under study.
You may also wish to explain to the Spanish authorities the type of aid afforded by the Technical Assistance Program. While this Program has been mentioned on a number of occasions to Spanish representatives, there has been no intensive discussion of it nor has it been explained in detail with specific reference to Spanish needs. A survey team to study the Spanish economy and public administration and to make recommendations regarding the sectors of the economy most urgently in need of attention could furnish the information needed to lay out a sound program for the economic recovery of Spain. Such a mission, similar to the one sent to Brazil in 1948, could very likely be arranged upon receipt of an appropriate request from the Spanish Government. If this type of survey were not desired, you might find interest expressed by the Spanish Government [Page 795] in technical assistance of one or more specific, types, such as industrial, agricultural or in the field of public health.
The elimination of the external pressure exerted by the United Nations resolutions,3 together with a manifestation of our willingness to afford material aid and the feeling of interdependence arising from the deterioration of the world situation may reduce the intransigence of the Spanish Government toward more liberal policies and practices, particularly of an economic nature. If the needs of the mass of the Spanish people could be met more satisfactorily, the Spanish Government would probably feel even greater confidence in its own security. It might thus be encouraged eventually to take steps toward more liberal political policies, not unmindful that changes away from its present totalitarian appearance would be likely to improve Spain’s standing with its neighbors and facilitate its acceptance by them as a participant in Western European enterprises. As the opportunity arises, I hope that you will encourage and assist the Spanish Government to make progress in that direction, both to hasten Spain’s full restoration to the Western European community and to promote sound political and economic conditions in Spain as the most effective long-term safeguards against the development of Communism.
Very truly yours,
- Drafted by Dunham, Biegel, and Millar of the Office of Western European Affairs. Stanton Griffis, former Ambassador to Argentina, was formally confirmed by the Senate as Ambassador to Spain on February 1. He departed for Madrid in midmonth, arriving in Spain on February 20. (Telegram 3657 to London, February 5, file 123 Griffis)↩
- See Foreign Relations, 1950, vol. iii, p. 1549.↩
- The reference is to the revocation by the U.N. General Assembly during its Fifth Session in 1950 of a 1946 resolution calling upon member states to withdraw their Ambassadors from Madrid and banning Spanish membership in international agencies created by or related to the U.N. Organization.↩