19. Telegram From the United States Delegation at the North Atlantic Council Ministerial Meeting to the Department of State1

Secto 20. Subject: Bilateral talk with British2NATO and Soviet economic offensive. Lloyd at outset referred briefly to recent visit [Page 55] Soviet leaders London.3 He said they appeared very confident and intended proceed with their program for economic expansion.

Secretary referred to his recent statement regarding NATO4 and said that a number of people had thought he was suggesting NATO assume responsibility for economic operations. That was not his intention. We were confronted with new types of problems with which NATO had a legitimate concern, and his suggestion was far more fundamental than proposing that NATO assume a new economic operating function. He observed that following Stalin’s death Soviet Government embarked upon a new line of: 1) exploiting differences between Western countries; 2) endeavoring wean away newly independent countries through economic offers, and capitalizing upon latent prejudices in those countries, and 3) trying to wreck the West through economic competition. We were now faced with situation in which a totalitarian power was operating in competition with free world economic system, where profits were essential to commercial enterprises. For political reasons Soviets were using their industrial power, cutting down their own requirements and setting prices regardless of commercial considerations. Secretary thought it essential that NATO powers do some careful thinking about this problem and how to cope with new Soviet policy.

Lloyd stated that he thought NATO could perform usefully in the exchange of information and planning, but he questioned whether it should have any role for economic action.

Secretary agreed that it should have no operating role in this field. It was a good body to discuss, on a community interest basis, how the objectives might be achieved. Actual implementation of an action program would fall elsewhere.

Lloyd observed that one possible course in meeting this new Soviet challenge might be to rely upon United Nations for provision of international aid and to force Soviets to do likewise. He would not favor this course unless it were essential. Alternative might be to set up an organization of “donors” who had capital surpluses available for aid to other countries. He inquired whether the Secretary would prefer this course to some other, such as use of existing institutions like the IBRD and creation of other organizations like proposed African Bank.

Secretary said he had been thinking about this problem but had no firm views as yet.

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Lloyd commented he had discussed this question with Brentano and latter had indicated he likewise had no clear idea as to what would be most suitable type organization.

Secretary stated he hoped that out of NATO Council discussion might come a small committee of Ministers who would study matter over next few months and come up with some sort of conclusions. We were studying it in United States and group engaged in this work would make its report about middle of November so that it would be available before Congress met in January. He hoped NATO committee would be giving thought to question at same time. He thought it might be useful to have special NATO Ministers meeting in late fall or early winter to pursue matter on basis of proposed committee of Ministers report.

Lloyd commented that while he was impressed by Secretary’s ideas, he would much rather embark upon wider international discussions after he had made up his mind as to what he would want to do. He suggested possibility of United States, United Kingdom and Canada talking over the problem before bringing in all NATO powers.

Replying to Caccia’s question, Secretary said US would not necessarily desire be a member of suggested NATO committee to study problem.

Responding to Jebb’s query as to whether Pineau had expressed any views on question, Secretary stated that Pineau had given him elaborate paper May 2 which he had not yet had an opportunity to study,5 but he understood that essence of his suggestion was using UN and having NATO take initiative through UN. Merchant elaborated, saying that Pineau’s proposal envisaged global OEEC which would report to ECOSOC.

It would involve standing committees on technical assistance, banking funds, etc., leaving complete scope of freedom for execution such bilateral and multilateral arrangements as Colombo Plan.

He understood paper would be distributed to other delegations and that Pineau would speak to Council on this subject May 4.6

Caccia observed that an advantage to forming small committee, as suggested by Secretary, would be that it could study problem and submit a report to all members of NATO for consideration.

Secretary, replying to question by Lloyd, said that while US did not insist upon being member of committee it would take an active role in consulting with committee members.

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Lloyd agreed it would be much better to have small committee members of which would come to us for ideas. He inquired whether Secretary would put forward the idea at Council meeting.

Secretary replied he would, and would like rearrange agenda to have matter discussed May 4 rather than May 5 to give more time for consideration.

  1. Source: Department of State, Central Files, 740.5/5–456. Top Secret. Drafted by Rountree. Repeated to London.
  2. A copy of the May 17 memorandum of this conversation among Lloyd, Caccia, and Dulles (NATO/MC/7), which took place the morning of May 3, is ibid., Conference Files: Lot 62 D 181, CF 701.
  3. Reference is to the State visit of Bulganin and Khrushchev to the United Kingdom, April 18–23, 1956.
  4. For text of Dulles’ speech entitled “Developing NATO in Peace” delivered to the Associated Press luncheon meeting in New York on April 23, where he explored the possibility of strengthening the nonmilitary ties of the Allies, see Department of State Bulletin, April 30, 1956, pp. 706–710.
  5. A copy of the French proposal to establish an agency for world economic development, transmitted in Secto 18, May 4, is in Department of State, Conference Files: Lot 62 D 181, CF 706.
  6. See Document 22.