137. Memorandum From the Deputy Under Secretary of State for Economic Affairs (Prochnow) to the Acting Secretary of State1

SUBJECT

  • Dodge Council Staff Study on European Coal and Steel Community

Discussion:

Based on submissions from State and other agencies, the Dodge Council on April 19 concluded that U.S. policy of support for the Coal and Steel Community (CSC) should remain unchanged but that internal CSC cartel problems warranted a continuing concern. It asked the Department to submit additional information on these problems and on U.S. actions to further the development of a competitive coal and steel market in the CSC. The requested report2 (Tab C) was sent to the Council on October 28.

Mr. Clarence Randall commented on the Department’s report in a memorandum to Mr. Dodge and transmitted a copy to Mr. Kalijarvi3 (Tab B). Mr. Randall was especially interested in a project under study by the Department for a U.S. steel expert group to visit the CSC at the invitation of the High Authority to consult with that body on the comparative organization and operation of the steel market in the U.S. and the CSC. (The Department is currently preparing to discuss this matter with the High Authority.) In addition, he expressed an interest in two external problems of the CSC, the cartel which fixes prices for steel exports from the Community and the centralized purchasing of scrap imported into the Community.

On the basis of the Department’s report of October 28, a CFEP Staff Study4 (Tab A) was prepared and, at the request of the Secretary of the Council, concurred in by the Department. The recommendations of the CFEP Study are (1) the State Department’s report be noted by the Council, (2) the Department welcomes suggestions from other agencies on the Council for approaches to the High Authority on cartel problems, and (3) State’s present policy of consultation with and representations to the High Authority on cartel problems should be continued and intensified where opportune.

[Page 367]

Recommendations:

1.
Approve the three recommendations in the CFEP Staff Study.
2.
If the steel export cartel and the centralized purchasing of imported scrap are raised, the following points should be made:
a)
In view of its limited power under the Treaty to deal with the export cartel, the High Authority is tactically in a poor position to do so until after it has taken action on the more central problem of cartels and competition in the domestic steel market. Therefore the Department would not consider it wise at present to press for High Authority action on the export cartel.
b)
As a result of U.S. representations, purchase of U.S. scrap exclusively from one group of dealers in the U.S. has been terminated by the High Authority. Purchase of all imported scrap by one central agency in the CSC is being continued temporarily, but on the basis of competitive bidding under which any U.S. dealer may export to the CSC.
c)
The Department continues to be concerned about both of these problems and is keeping them under review.5

  1. Source: Department of State, ECFEP Files: Lot 61 D 282A, CFEP 520. Secret. Drafted by Winter; E, ITR, and RA concurred.
  2. Document 126.
  3. Document 132.
  4. This three-page study, CFEP 520/6, is not printed. (Department of State, ECFEP Files: Lot 61 D 282A, CFEP 520)
  5. Hoover initialed his approval of these recommendations on the source text.