Foreign Relations of the United States, 1955–1957, Western European Security and Integration, Volume IV

92. Memorandum of a Conversation, Department of State, Washington, April 20, 1955¹

Washington, April 20, 1955

SUBJECT

• The European Coal-Steel Community

PARTICIPANTS

• Albert Coppe—2nd Vice President, High Authority, European Coal-Steel Community
• Edward Behr—Staff, High Authority, European Coal-Steel Community
• Staff members, Departments of State, Commerce, Treasury, FOA and Export-Import Bank

During his day in Washington on April 20, 1955, M. Coppe met for one half hour with staff members of the Departments of State, Commerce, Treasury, FOA, and Export-Import Bank, to answer questions on matters of current interest to this group on the Coal-Steel Community.

The following questions were put to M. Coppe:

1. What is the current situation regarding the High Authority’s action on the coal cartels, especially GEORG. Specifically, could M. Coppe elaborate on his statement before the Press Club that afternoon that favorable developments in this field could be expected in about two months?²

M. Coppe prefaced his remarks by noting that cartels had existed in Europe for at least 60 years prior to the establishment of the Coal-Steel Community and that rapid changes could not be expected in this field. One of the major problems in dealing with the cartel situation resulted from the fact that the centralized organization of coal enterprises had assured an equilibrium of production and employment among all the coal mines. Employment was spread out equally in all mines under this system. A reorganization of the coal agencies which might result in great disparity of employment as among the mines would alienate workers and be very damaging to the future of the Community. M. Coppe believed that the High Authority now had a reorganization plan which took these social and economic factors into account and was hopeful that industry and labor would go along with it. The High Authority was under an obligation to report on this subject to the Common Assembly at its extraordinary session in May, at which time M. Coppe thought there would be some encouraging news to report. It was this report which he had in mind when he referred to the possibility of action in the next two months in his Press Club speech.

2. The U.S. is favorably impressed with the boom in steel production, the countries in the Community having already overtaken their production goals in this sector. Expanded output, had, however, substantially increased CSC’s demand for scrap, particularly imported scrap for steel production appears to be a long-run problem. What consideration is the CSC giving to this problem?

M. Coppe agreed that the steel industry in the CSC was overly dependent on scrap, noting that Italy’s steel industry was based on an 80% use of scrap and France used 50% scrap in making steel. The steel industry, however, was becoming aware of this problem and the High Authority was encouraging steel producers to increase the use of pig iron as against scrap in the steel making process. M. Coppe considered significant progress along these lines, however, would take two or three years. In the meantime, he emphasized the need for a continuation of scrap exports at current levels from the U.S. to the Community which was essential for maintaining the Community’s high level of steel production. He expressed the High Authority’s appreciation for the continued flow of scrap from this country.

He pointed out that there was strong pressure on the High Authority, especially from France, for the imposition of maximum prices and formal allocation of scrap and that it was only because the U.S. had continued to export large quantities of scrap that the High Authority had been able to resist such pressure. The High Authority did not wish to establish maximum prices, since this would freeze the already artificially low scrap prices in France and the Netherlands, thus perpetuating the problem of incentives for increased scrap collection in the Community. The High Authority was also opposed to allocation since this would involve the re-establishment of national scrap markets within the Community resulting in a serious set-back to the integration of the steel market. If the U.S. cut back on its export of scrap to the Community, M. Coppe emphasized that the High Authority would be forced to declare an emergency situation within 48 hours and impose maximum prices and allocation of scrap.

Representatives of the Departments of State and Commerce assured M. Coppe that the High Authority’s views as expressed in M. Monnet’s letter on scrap exports³ were being taken into account in the decision to consider further in this Government the availability and demand for scrap, including export demand. Pending this further study, export licensing on exports of steel scrap from the U.S. will continue unchanged.

M. Coppe was asked whether he thought the Italian steel industry could be competitive if it relied more heavily on pig iron instead of scrap, since this would require additional coking coal which Italy had to import and expanded blast furnace capacity. M. Coppe said that he was convinced that the Italian industry could be competitive under these conditions. He noted that there was no longer much advantage in using domestic coal as against imported coal since it had been demonstrated that U.S. coal could be delivered in Italy at about the same price as coal from Germany. He thought the raw materials situation in steel had been changing considerably, that the countries of the Community, including Italy, were becoming aware of these changes and were moving to take advantage of them.

3. What are the High Authority’s plans for use of the remaining $35 million of the U.S. loan? Was it planned to use part of these funds for housing?

M. Coppe first noted that there was actually only $25 million remaining to be allocated from the U.S. loan, since $10 million had been set aside for Italy and Belgium for industrial uses. The final transfer of the $10 million to Italy and Belgium was held up by some special problems. In Italy, the problem was the proposed imposition of taxes by the Italians on the loan, which had the effect of increasing the interest rate from 4% to approximately 8%. The High Authority was now attempting to work this out with the Italians and was hopeful that this problem would soon be settled. In Belgium the question involved power stations at the coal mines involving political difficulties with the electric power industry. Regarding the use of the remaining U.S. loan, M. Coppe said that he thought that the U.S. funds could probably not be used in France where there was difficulty in obtaining guarantees on exchange rates. He stressed, however, the tremendous psychological impact of housing sponsored by the Community, stating that workers were very proud of the housing already built under CSC auspices. The existence of these houses was a dramatic expression of the Community as a concrete achievement. There was a great need for housing in the Community, and the High Authority was planning to move ahead in this field primarily with funds borrowed in Europe, with perhaps in addition some drawing on the U.S. loan funds. He said he was not sure of the latest developments with respect to the possible use of the U.S. loan for housing.

4. What was the outlook for expansion of the common market in coal and steel to other fields?

Prospects for further expansion of the common market were encouraging. M. Coppe thought that the initiative would be taken by the Benelux countries since France was currently unable to take the lead and it was undesirable for Germany to assume leadership, for political reasons. The Benelux countries are primarily interested in moving forward to a customs union on a six-country basis within the framework of a supranational organization. Experience with their own customs union arrangements had persuaded the Benelux of the necessity for this type of framework for a larger country grouping. The Benelux countries, however, had no objection to an expansion of the Community which would proceed along functional lines and they understood that the French were prepared to accept further sector integration in the fields of transport, electric power, energy and fuel. He indicated there might be certain difficulties due to international ramifications of the industry bringing fuel oil under a supranational authority. The possibility of bringing peaceful uses of atomic energy within the Community, he considered most exciting and promising, since there were no vested interests in this field as yet and since it was a wave of the future which had captured people’s imagination. In his view, new sectors of the economy which might be integrated on a six-country basis would come under the existing CSC institutions, since this framework was well established and had already proved effective.

1. Source: Department of State, Central Files, 850.33/4–2955. Official Use Only. Drafted by Ruth H. Phillips of the Office of European Regional Affairs on April 29.
2. For Coppé’s statement to the press, see New York Times, April 24, 1955, p. 28.
3. Document 87.