Bonn Mission files, lot 311, D(51)149
Briefing Paper Drafted in the Office of the United States High Commissioner for Germany 2
NATO Problems
Schuman Plan
german participation
Summary
It is believed that German signature of the Schuman Plan Treaty can be expected shortly after resolution of the problems of the reorganization of the coal and steel industry under Law 27.3 These problems include the future of DKV, the agency which now has a sales monopoly of Ruhr coal; the problem of ownership of coal and coke production facilities by steel companies; and the number of producing units in the steel industry. Negotiations between ourselves and the Germans in these respects are now at a crucial stage. We are taking a firm position that, while we are willing to concede the necessity for a transition period during which DKV will be gradually phased out, and while we are not in principle opposed to reasonable ownership of coal mines by steel producers or to the existence in the steel industry of units of industrially efficient size, all cartels and excessive concentrations of power must be eliminated under Law 27. These negotiations are being carried on in close liaison with the French and British. It is hoped that these negotiations will come to a satisfactory conclusion in the near future and that Germany will proceed to sign the Schuman Plan Treaty.
German adherence to the Schuman Plan would be a major factor in the integration of Germany with the West and particularly in [Page 87] the proposed shift to a contractual basis in connection with German participation in Western defense. Studies are now under way to determine the extent to which Germany’s inclusion in the Schuman Plan will, by itself, justify the end of PLI and the Ruhr Statute and the extent to which the Schuman Plan must be supplemented by German contractual commitments respecting matters not within its scope.
Statement of Problem
The Schuman Plan is intended to integrate the production of coal and steel and create a single market area for these commodities in Western Continental Europe. It is one of the cornerstones of the political and economic integration of Western Europe favored by the United States. Negotiations looking toward the conclusion of a treaty implementing the plan have now been going on, with occasional intermissions, since June of last year. German participation is, of course, a prerequisite to the success of the Plan, and Germany’s role in this connection has acquired even greater importance through the prospect that Germany may participate, industrially as well as militarily, in the common defense of Western Europe. The problem is to estimate (a) the present status of German participation, and (b) the effect of such participation upon Germany’s relation with the Allies.
Discussion
The majority of Germans, in and out of Government, still favor the Schuman Plan as a step toward European unification. The Federal Chancellor seems to be sincerely desirous of a successful outcome. The Socialists have tended to be highly critical but have, on the whole, adopted a wait-and-see attitude. German participation in the Schuman Plan is closely related to Allied High Commission Law 27 which requires the reorganization of the coal and steel industry in Germany. In December, in the negotiations in Paris, the Germans took the position that they would not be able to approve the Schuman Plan Treaty until the pattern to be established in these industries under Law 27 was more clearly defined. The relevant issues under Law 27 are:
- (1)
- The composition of the reorganized companies, especially in steel;
- (2)
- The question of how far the iron and steel producers should be allowed to control “captive” coal mines;
- (3)
- The future of DKV, the central sales agency which now completely monopolizes sales of Ruhr coal.
Composition of Unit Companies
In December we submitted to the Federal Government for comment a plan for the reorganization of the German steel industry, [Page 88] based on the creation of twenty-nine unit companies. This number of companies is somewhat misleading. It includes a large number of small units, such as small foundry and special steel companies, which were proposed by the Germans themselves. The differences of opinion between the Federal Government and the Allies has been limited to a small number of the largest plants.
The companies proposed by the Allies were intended to be able to compete effectively on an equal basis with other European steel enterprises, and are comparable in size. The Federal Government has taken the view, however, that their ability to withstand periods of severe economic crisis would in some cases be improved by the increase in rationalization and diversification which would be made possible by its suggested combinations. It is believed that the differences in view on this question can and will be satisfactorily resolved.
Coal-Steel Integration
On the coal-steel issue, the Germans have taken the position that vertical integration is essential to the efficient operation of their steel industry. Their principal reason is that the widely differing qualities of iron ore available to German steel producers necessitate close control by individual producers over their supply of coke to assure proper quality. It is not easy to evaluate this argument, especially as to how much difference this integration makes in terms of costs. The French, on the other hand, whose steel industry is in large measure dependent on German coke, naturally fear a situation in which competing German steel producers have full coke supplies during periods of coal shortage requiring allocation. The British, for broader reasons, oppose close integration of the coal and steel industries.
The problem is to try to reconcile these divergent viewpoints. While recognizing the merits of the French position, it would be undesirable, especially in relation to the Schuman Plan, to give the Germans any impression that the Allies are deliberately lowering the efficiency of the Ruhr steel industry for their own advantage. An intermediate position would be to permit the Germans to have partial integration of coal and steel production, to the extent justified by considerations of genuine industrial efficiency, but not to such an extent that German steel producers will be fully independent of coal shortages which may, in times of full production, hamper their competitors in other countries. Such an advantage, based upon control rather than economic factors, would tend to reproduce the unbalanced development of the post-World War I period and would be at odds with the purpose of the Schuman Plan to create an equal basis for competition. On this matter also, it is [Page 89] hoped that a compromise may be worked out between the viewpoints of the Allies and the Germans.
Dissolution of DKV
The third main problem under Law 27 which also affects the Schuman Plan is the dissolution of DKV. This agency has a complete monopoly in the sale of Ruhr coal. Similar control sales agencies have existed for many decades in the Ruhr, but the continued existence of DKV is completely inconsistent with both Law 27 and the Schuman Plan. Law 27 calls for the creation of separate coal mining companies which will also sell independently. The Schuman Plan is based on the creation of a common market supplied by a number of independent sellers. Articles 60 and 61 of the Schuman Plan treaty are designed to prevent combines and cartels which might restrict competition or create a monopoly.
The French regard the dissolution of DKV as essential to the success of the Schuman Plan. Their view is that if DKV survived, the French steel companies which depend on German coke would claim the right in self-defense to maintain a single buying agency, and that this would create the kind of super-cartelization which the Plan is intended to do away with. They have made it clear to the Germans that the continued existence of such cartels is too high a price for their participation in the Schuman Plan. The continuance of DKV is supported mainly by the mining union and some of the coal companies. They consider it a desirable agency to regulate the industry especially in periods of shortage or glut. Under the Schuman Plan the High Authority would have sufficient powers to deal with any legitimate problems of this type. Consequently, DKV would not serve any useful purpose but would merely enable the industry to maintain its monopoly.
Of course, in dissolving DKV some period of transition would be required to enable the German coal companies to create adequate sales organizations of their own and allow the German Government to establish machinery for allocation in periods of shortage.
The Germans naturally take the position that their participation in the Schuman Plan should mean the end of major occupational controls over coal and steel production, particularly PLI and the Ruhr Statute. The German position is not devoid of foundation, and the problem is plainly one which merits careful study. We are now seeking, as part of our studies in connection with the problem of placing our relationship with the Germans upon a contractual basis, to determine the extent to which German participation in the Schuman Plan would obviate the necessity for other German obligations with respect to the production and marketing of coal and steel. Thus, countries not participating in the Schuman Plan [Page 90] should be assured the same access to the Ruhr coal and steel market that they now enjoy under the Ruhr Agreement, and equitable apportionment of materials in short supply which are needed for common defense. There must be some adequate substitute for the existing allocation powers of the Ruhr Authority. The Ruhr Statute, moreover, provides specific guarantees for the carrying out in the coal and steel industries of a number of important general Allied policies—the prevention of Nazis from regaining control of these industries, protection of foreign interests, the prevention of the development of excessive concentration of industrial power. All these Allied interests must be covered either under the Schuman Plan or through other German commitments in connection with the shifting of Allied-German relationships to a contract basis.
Conclusion
We should make every effort to facilitate speedy signing of the Schuman Plan Treaty by Germany without in any way compromising the basic principles of deconcentration and decartelization under Law 27. German participation in the Schuman Plan will, in our view, go far toward making unnecessary the continued existence of PLI and the Ruhr Statute, although certain other Allied policies which are embodied in the Ruhr Statute and PLI, but which are not within the scope of the Schuman Plan, will have to be the subject of discussions looking toward satisfactory German commitments in connection with the general proposed shift to a contractual basis.
- Prepared for the Western Ambassadors Conference, Frankfurt, Germany, February 5–8; designated “(Item 6).” The Schuman Plan was discussed during the meeting of February 7. See the Summary Record, designated AMCO/SR(51)5, Document 75.↩
- The text of Law 27, “Reorganization of German Coal and Iron and Steel Industries”, is printed in Laws, Regulations, Directives and Decisions of the High Commission for Germany, vol. I (September 21, 1949 to September 20, 1950).↩