88. Memorandum From the Deputy Assistant Secretary of State for European Affairs (Barbour) to the Deputy Assistant Secretary of State for Economic Affairs (Kalijarvi)1
SUBJECT
- Export Controls of Scrap Iron: Dodge Council Consideration on March 29
With regard to the proposal by the Commerce Department that export controls be imposed on ferrous scrap, EUR is unprepared to judge whether as a result of current and anticipated exports, an excessive drain of U.S. scrap from the domestic economy is likely to occur. I understand that E has reason to believe that there is no economic necessity for the imposition of export controls; we would consider, with you, that in the absence of economic necessity export controls would be contrary to our foreign economic policy of removing all possible trade barriers both at home and abroad. If, on the other hand, there is an economic justification for controls, then EUR’s concern would be directed to furthering the establishment of equitable export quotas reflecting a fair balance of domestic needs and foreign requirements of the CSC countries and the U.K.
In this connection I would like to point out to you that the CSC countries and the U.K. will be seriously affected by a decision to impose controls and by the extent of any controls decided upon. In a letter of March 172 M. Monnet states that the imposition of quota controls on export of U.S. scrap might entail establishing an internal allocation system in the Community in contrast to present free operations and, through restoration of national scrap markets, result in a backward step in European economic integration. He also outlines the relationship between steel production in the Community and the defense efforts of the CSC members and the possible effect of controls upon the total level of economic activity in Europe. In conclusion, M. Monnet suggests to us that the CSC governments might study possibilities for limiting U.S. scrap purchases to the present level or, if the U.S. could not agree to this, then the U.S. should consider not reducing scrap exports to the Community below the present level without at least three months advance notice.
The U.S. shares the strong interest expressed in Monnet’s letter in avoiding an adverse impact on the process of European integration and on the economies and defense production of our allies. Reduced availabilities of U.S. scrap would also be of serious concern to the U.K. With the drying up of scrap supplies in Europe, the U.K. is counting on greatly increased imports of scrap from the U.S. in order to fulfill its steel production program on which depends both its vital export market and continuation of its present rate of defense production.
The EUR position is that our foreign policy objectives for EUR countries would be served by further assessment not only of U.S. but also of other Free World countries’ supplies and reserves of, and requirements [Page 278] for, iron ore, pig iron, and the various grades of ferrous scrap before a final decision to impose controls is made. If a decision to impose controls cannot be avoided, then it is important that the level of exports from the U.S. be sufficient to avoid various unfavorable repercussions on our objectives and interests in Europe. In the first place, the quotas established should be at a level sufficiently high not to weaken the economies of friendly countries needing U.S. scrap. Secondly, quotas should be at a level which will not invite cut-backs in the defense industries of our allies. In addition, quotas should bear some equitable relationship to amounts available to U.S. scrap consumers. Lastly there should be full and frank consultation on the various aspects of our scrap problem with the CSC and with interested countries in order that they realize that their interests are being considered to the fullest possible extent. Adherence to these standards might well be of more importance to our relationships with friendly countries concerned than the actual imposing of export control.3
- Source: Department of State, RA Files: Lot 58 D 374, CSC–Scrap. Confidential. Drafted by E. Allen Fidel, Officer in Charge of Economic Affairs, Office of British Commonwealth and Northern European Affairs (BNA); Robert W. Barnett, Officer in Charge of Economic Organization Affairs, RA; and Louis Boochever.↩
- Supra .↩
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At the 14th meeting of the CFEP on March 29, the Council decided that quotas should not be established on the export of ferrous scrap pending the consideration of more complete information based on a further study by the Advisory Committee on Export Policy (ACEP). One of the considerations of the ACEP’s study was to be the “requirements of scrap for friendly foreign countries, particularly Japan, the United Kingdom and the European Coal and Steel Community.” (Eisenhower Library, CFEP Records)
In a letter to Monnet of April 15, Dulles stated that the High Authority’s views regarding the export of steel scrap from the United States had “been made known to the heads of the United States agencies principally concerned, and the significance of exports of steel scrap from the United States to the European Coal and Steel Community and to the European economy, as discussed in your note, was taken into account in the decision to consider further within this Government the availability of scrap and the demand for it, including the export demand.” The letter was transmitted in circular airgram 7117 to Luxembourg, April 16. (Department of State, Central Files, 400.119/4–1655)
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