273. Memorandum of a Conversation, Mid-Ocean Club, Bermuda, March 22, 1957, 10:30 a.m.1



  • United States
    • Secretary Dulles
    • Ambassador Whitney
    • Senator Walter F. George
    • Mr. Phleger
    • Mr. Elbrick
    • Mr. Berding
    • General Goodpaster
    • Mr. Parsons
    • Mr. Walmsley
    • Mr. Timmons
    • Mr. Macomber
    • Mr. Dale
  • United Kingdom
    • Foreign Secretary Selwyn Lloyd
    • Mr. P. H. Dean
    • Sir Harold Caccia
    • Sir Frederick Hoyer Millar
    • Lord Hood
    • Sir Richard Powell
    • Mr. Denis Laskey
    • Mr. J. A. N. Graham
    • Mr. Dobbs
    • Miss Rolleston


  • U.K. Association with the Continent


Mr. Lloyd opened by reviewing the WEU discussions of the British plans for force reductions in Germany.2 He explained the U.K. had made it clear to the other WEU members that it had already made a firm decision to make substantial reductions in its armed forces in order to live within its financial means, but that it had not yet decided how much of the cut would fall on British forces in Germany. He said that the British were ready to meet SACEUR’s first recommendation concerning the timing of reductions and that they had no objection in [Page 723] principle to his second recommendation dealing with a rotation of air units but that they could not accept the third recommendation for placing the 5,000-man strategic reserve in Germany because Army units had to be stationed a certain length of time in the U.K. if HMG was to attract a sufficient number of recruits into the armed forces.

Mr. Lloyd stated that on Monday several proposals (including the Dutch, Belgian and Italian) were put before WEU and that the temper of the meeting was “quite good” as it reflected a common determination not to let the organization break up over the question of the British force reductions. He said that the first year’s reduction of 13,500 men would be concentrated among administrative and antiaircraft units. When it comes to discussion of the second slice in October, he stated that the British mind is closed regarding a reduction of 8,500 but still open on the question of the 5,000-man strategic reserve. Mr. Lloyd said the British are still planning, however, on the assumption that this force will be stationed in the U.K. rather than Germany.

Mr. Lloyd said that the Germans attach great importance to their proposal for a review in NATO, and, although the British were unenthusiastic about it, they would support the Germans because the Germans had been so helpful to them in the WEU meetings.

Mr. Lloyd went on to say that although the British reductions were generally represented as a weakening of their forces on the continent, in fact the cuts would be more in the “tail than in the teeth” and there would be only a “slight weakening if it is any weakening at all”. He also referred to an improvement in the quality of the remaining British forces in Germany. Mr. Lloyd added that only the U.S. and the U.K. maintained substantial forces in Germany and that it cannot be argued a “chain reaction” would take place as there is very little left to reduce as far as the other countries are concerned.

Mr. Lloyd said the argument they had used in WEU was economic to begin with in accordance with General Norstad’s request, but since the fighting capability of the remaining U.K. forces would actually be superior, military efficiency was also involved.

Secretary Dulles suggested that discussion of military aspects be postponed until afternoon because we had some military people coming at that time. Mr. Lloyd replied that he understood the afternoon meeting might be a restricted one and wished to be sure to get his ideas on the record.

The Foreign Secretary then turned to economic aspects of British association with the continent saying that he was worried over developments regarding the free trade area and common market. He said that the British had found it necessary to eliminate agricultural products from their free trade area proposal because of the Commonwealth, in particular Australia, and that it was not yet clear what the [Page 724] six were going to do about agriculture. He thought, however, that something could be worked out between the common market countries and U.K. on this point.

Mr. Lloyd stated that the French decision to include their North African colonies in the common market was a more serious matter. He feared that they would endeavor to erect a high tariff wall around themselves and Northern Africa which could split Western Europe and destroy the efforts which have been going on to liberalize tariff barriers. He claimed that the Belgians, on the other hand, desire a low tariff wall and if this principle prevails he believed that the U.K. could solve its problem with the colonies. Otherwise the U.K. would be accused of selling its colonies down the drain and the free trade area might no longer be feasible. He said that the Portuguese, Greeks and Turks resented the French position too and that he did not think the French themselves realized the trouble they will have with GATT. He added that all the U.S. and U.K. could do was to keep up pressure for a low tariff solution.

Mr. Lloyd then turned to discussion of the U.S. tariff, stating that he was worried over restrictions of oil imports from the Middle East, woolen worsteds and bicycles. He said that the President has up for decision the question whether to set the low tariff quota on worsted at 6 and ½ percent or 5 percent, and that the former would be of great assistance to the British. He added that, having borrowed money here, it was necessary for the British to trade with us in order to be sure of paying the money back. Mr. Lloyd said that the question of American tariffs, however, was not just a part of Anglo-American relations but also concerned the broad problem of maintaining a liberal trade policy.

The Foreign Secretary said that the British wished to build up the OEEC and to handle their relations with EURATOM through it. In this connection, he cited the OEEC Steering Committee on Atomic Energy.

Mr. Lloyd then turned to political aspects of the association with the continent and mentioned first that WEU members had agreed to holding regular Ministerial meetings every three months. He added that the British certainly did not want WEU to become a special group in NATO and said that in order to meet this point he had suggested that the organization be transferred to Paris with the NATO representative acting for WEU as well. He mentioned that this suggestion was received unfavorably by the continental members of WEU who maintained that such a move would look as though the U.K. were trying to disassociate itself from the continent and cited the fact that the Armaments Control Agency and Special Armaments Group of WEU were already in Paris.

[Page 725]

Mr. Lloyd said that the U.K. had cooperated in the report of the “three wise men” on NATO’s political functions3 and were cooperating in NATO along this line. He also mentioned that the U.K. had accepted promptly Lord Ismay’s proposal of good offices in the Cyprus dispute.

Mr. Lloyd said that, except for the Coal and Steel Community Assembly which controls the High Authority, European organization assemblies are largely debating societies. Referring to the Council of Europe, he claimed that the relations between the Assembly and Council of Ministers had proven a failure. He said the British thought it was time to pull all the assemblies together into one which would, in turn, have committees on economic, cultural and military affairs. The military committee, which would do roughly what the WEU Assembly and the Assembly of NATO Parliamentarians do now, would have to be somewhat detached in order not to scare away neutrals from the economic and cultural committees. Mr. Lloyd thought that by this means a common feeling of unity could be built up in free Europe. He added, however, that the last thing the British wanted to do was to scare away the North Americans and hoped that if the common assembly should come into being we would become members of the military committee and perhaps associate members or observers on the others. Mr. Lloyd said that these assemblies are becoming a serious problem which might tend to split rather than unite Europe. Therefore, the British Government was suggesting a single assembly in their place with headquarters probably in Paris. This proposal, he said, gave effect to a striking trend in the UK toward closer association with the countries of Western Europe.

Mr. Dulles said that he would not comment on the military aspects of the Foreign Secretary’s remarks as the President had views he would wish to express in this field. On the economic side, however, he said that we were encouraged by trends towards integration in Europe, especially the Common Market, EURATOM and the Free Trade Area. He stated we have thought for a great many years that Europe could not realize its full potential without a greater degree of unity. The Secretary said that the French had told us they favored a common market area with low tariffs vis-à-vis outside countries. At this point Mr. Lloyd interjected that the French might start off with “high resolve” but he feared they would soon lapse.

[Page 726]

The Secretary agreed that we must recognize the existence of this danger because of the pressure of French industrialists who operate on a high price-low output production system. He then warned that the effect of a high tariff wall on our own tariff policy could be considerable.

Referring to U.S. tariff policies, the Secretary said that the President and the Executive Branch desire to pursue a liberal tariff policy but that the trend in Congress is in the other direction, a fact which cannot be ignored. He explained that previously, when the South was chiefly a cotton producing area, it could be counted upon to support low tariffs and free trade but that with the movement of industry to the South that area had become more protectionist minded. He said that it becomes harder each time to obtain Congressional approval for liberal trade legislation and that, whereas the President’s views were based on the general interest and interests of the world as a whole, Congress tended to represent the views of special interests which superficially seemed to be advanced by higher tariffs. The Secretary forecast trouble when the Reciprocal Trade Agreements Act comes before Congress again next year but said that the Executive Branch would continue to pursue liberal trade policies, perhaps not on every case but as a rule.

Concerning the political aspects of U.K. association with the continent the Secretary agreed that the multitude of organizations and assemblies presents a confusing picture and that simplification is desirable. He believed that some organizations should be entirely European in scope, perhaps even entirely continental. The Secretary said that we shouldn’t retard progress towards integration in some of these in an effort to assure unity of treatment. Similarly, he did not believe that we should wish to see such great breadth of representation that it would hold up progress on such organizations as the Common Market, EURATOM or the free trade area.

The Secretary said that he did not know what the impact of these moves towards European unity would be on NATO. He recalled that we had tried hard to make NATO a more effective forum for political consultation but said he did not feel himself that we had yet “struck oil” in this field and that the tendency still exists for NATO to operate on the old basis. The Secretary said he was a little discouraged about this and believed that perhaps other organizations were more effective in some fields. He explained that it was difficult to steer all matters through the NATO Council and that the Congress was irritated when it first read in the press of policies agreed in the NAC, just as the NAC was irritated when it first read in the press of U.S. policies of interest to it which have been discussed with Congress. He said that Canada and the U.S. properly have interests, particularly in the defense fields, which would inevitably involve all of us. In this connection, he mentioned [Page 727] the retaliatory air power which is principally a U.S. weapon but upon which all NATO members depend. He said, however, that our presence was not so indispensable in other areas, such as the economic, although we have indicated a willingness to contribute there too. He cited our offer of atomic material to EURATOM stating that it was in our interest as well as Europe’s to see atomic power development pioneered in Europe. He believed that the U.S. could benefit by European experience in building such production facilities and that a lowering of the cost of atomic power should result. He was sure, he said, that the U.K. could associate itself usefully with EURATOM as it has with the Coal and Steel Community.

The Secretary said that he had not been able to study the many complications involved in relationships between the Common Market and the Free Trade Area. He stated that the U.S. supports these developments in principle but that serious problems would arise if tariffs were raised against U.S. goods. He recognized, however, that the early development of the Free Trade Area or Common Market might involve economic sacrifices for us but hoped that they could be kept to a minimum.

Referring to WEU, the Secretary said we realized in 1954 that a question could arise whether the center of gravity would be in NATO or in WEU. He stated that we should not like to see a situation develop in which WEU would reach decisions first which the NATO Council would then confirm on a pro-forma basis. Mr. Lloyd replied that lately NATO Council meetings have gone well and that NATO and WEU have fitted in well together. He stated further that the last month has been a justification of the capacity of both bodies to cooperate with one another. He then referred to the existence of feeling in Europe in favor of creating a third force between the U.S. and the USSR and said that even some in the UK advocated this development. He emphasized strongly that the U.K. Government was going to prevent the driving of a wedge between Europe and America but warned that the tendency did exist and that it could be dangerous. He believed that European integration should be achieved within the NATO concept.

The Secretary replied that he would not object to seeing Europe and the U.K. become a force just as long as it was not a neutralist one. He said he thought there should be unity among all of us in military and political policies but that in the economic field he would like to see Europe itself draw closer together, including North Africa. He mentioned that weakness in Europe tends to create dependence on the U.S. which also leads us to desire a strong Europe, but not as an intermediary playing the USSR and U.S. off against each other. The Secretary said he foresaw no development in Europe in the next generation which was likely to relieve it of dependence upon the deterrent power of the U.S.

[Page 728]

The Secretary went on to say that he had some apprehensions concerning the impact on NATO of strengthening the WEU Council and added that it would be helpful if the U.S. can be fully informed of what goes on in WEU. He agreed that recent meetings of the two organizations have been well coordinated and said he understood that some countries which voted for the military review proposed by the Germans in WEU would not necessarily support it in the NAC.

Mr. Lloyd confirmed that WEU had merely voted to send the German proposal to NATO for consideration. He added that the U.K. had been placed in a somewhat awkward position by the fact that Adenauer had intended to be of assistance, hence it was inappropriate for the U.K. to attack the proposal out of hand.

Mr. Lloyd stressed that bringing North Africa into the Common Market changed the shape of the original project.

Mr. Dulles said that he had no opinion as yet on that subject and that perhaps the problem of Western European relations with Africa should be studied as a whole. He believed that Western Europe would come to depend increasingly on Africa in the future and that perhaps the inclusion of the colonies of some continental powers in the Common Market would have to be accepted. He reiterated at this point that he did not wish to express a specific opinion on this question.

Senator George remarked on the friendly feeling in the U.S. towards progress being made with the Common Market and Free Trade Area and said it was his impression the U.S. public believed the membership itself should determine how far these organizations should go in Africa. The Secretary supported him, saying that we would not oppose inclusion of the colonies in the Common Market if such action were necessary to obtain approval for it.

German Reunification and European Security

Mr. Lloyd opened discussion on this subject by saying that he felt anxious about the next three months in Germany. He cited a recent speech of Mr. Gaitskell’s there,4 in which he called for the launching of a peace offensive, as evidence of the erosion of opinion in the British Labor Party and a veering towards neutralism for Germany. He recommended that in view of this development we should try to take a more positive line. He expressed some disappointment with the results of the four-power Working Group5 in that they had produced no [Page 729] specific proposals for refurbishing our position. Mr. Lloyd stated that the Western stand was still sound but that we needed a fresh statement of it.

The Secretary agreed saying that with the German elections6 coming along three courses of action might occur: 1) Adenauer could make a startling new proposal in order to indicate his zeal for unification; 2) the Soviets could make a beguiling offer shortly before elections; or 3) a Four-Power proposal might be made. He thought that unless something positive is done along this last line, we might have to deal with either of the first two. The Secretary said that our position at the Foreign Ministers meeting in 1955 had been too involved and had never really gotten across to the public in the face of Russian propaganda designed to confuse it. He suggested that we give the working party a new mandate, namely, to evolve a fresh statement of our position on German reunification on the assumption that we might have to say something new on the subject within the next month. He said that the Governments concerned could look at it and accept or reject it.

Mr. Lloyd then stated that possibly we should now “grasp the nettle” and accept the idea of another meeting with the Russians, perhaps in June in order to make sure that our point of view on German reunification gets across. He said this action would remove the issue of whether or not there should be a meeting from the German election. He expressed confidence that Chancellor Adenauer could make our case clear to the German people but added that if the Chancellor did not want such a meeting then of course we would not go through with it.

The Secretary said that a meeting per se would not necessarily be an asset for us. The Russians could use it to disseminate their propaganda proposals and to give them greater authority. The real question is, in his opinion, whether we have a good position which would allow us to dominate such a meeting. He said that if our position were based on the working group report, a meeting with the Russians would be a liability.

The Foreign Secretary replied that the risks involved in not holding the meeting might be even greater. He foresaw benefits from nailing the USSR position down clearly on such matters as social gains, foreign affairs and elections when applied to a unified Germany. He advocated cross-examination of the Russians.

The Secretary in turn replied that he had never found it profitable to cross-examine the Russians.

[Page 730]

Sir Frederick Hoyer-Miller said that it was dangerous to go into a meeting of this type with the Russians and that they might well use it to defeat Adenauer in the approaching election.

The Secretary then said that if the conference should succeed Adenauer would have to go to the polls as one who had make his last effort with the Russians and had failed. He said that we would never do better than during the last meeting to put the Russians in a bad position but world opinion had failed to realize that the issue there had really been not whether a unified Germany would be neutral but whether it would be Communist.

Mr. Lloyd said these were strong arguments but that he still did not consider the question of the meeting one sided. He suggested that the four Governments submit the working group report to NATO and that the working group itself be asked to re-commence working on the basis of its recommendation. NATO concurrence was not required to initiate this task by the Four-Power Group. Mr. Elbrick and Lord Hood were delegated to prepare a paper showing what procedure might be used to convey the results of the Four-Power working group to the NAC and to initiate working group study of means of refurbishing the Western position on German reunification.7

The USSR and Satellites

Mr. Lloyd stated that our attitudes towards the USSR were generally similar and that the only point he wished to raise concerned cultural exchanges. He explained that the Russians were pressing for resumption of cultural relations and that the British believe it is in our interest to bring scientists, etc. to the West in order to keep an intellectual ferment active inside the USSR. He said that the British wished to restore these interchanges to about the same level as before the Hungarian rebellion.

The Secretary said that we did not disagree with this action as long as it is undertaken cautiously. He pointed out that such exchanges are beneficial in that they contain the greatest long-run hope for increased education among the Russians. An educated mind dislikes uniformity and is likely to question authority. On the other hand, he said the Russian rulers tend to consider cultural contacts as a sign of social acceptance and even of approval for their policies. He warned that even some weak free world countries share this attitude to a degree and are vulnerable to penetration from this source. Nevertheless, the Secretary stated he did not disagree with a cautious resumption of cultural contacts.

[Page 731]

[1 paragraph (6 lines of source text) not declassified]

Mr. Lloyd then asked whether we contemplated giving economic aid to Poland. The Secretary replied that a Polish mission is now in the U.S. and that exploratory talks are under way.8 He expected that only small scale aid is likely in light of opposition from Congressional sources and doubt whether we can utilize our agricultural surpluses for this purpose on terms which the Poles would be prepared to meet.

Mr. Lloyd said that we should support steps to reorient Polish trade towards the West and provide aid in moderate amounts, being careful, however, to avoid the appearance of cashing in on the new political situation in Poland. He mentioned that the U.K. might relax the terms of their own trade agreement with the Poles; with this thought in mind, Sir Frederick Hoyer Millar then added that the best way to deal with the satellites is to step up our propaganda rather than provide large scale aid or invite rebellion.

The Secretary agreed that the best course is to promote peaceful evolution among the satellites away from the USSR [less than 1 line of source text not declassified]. He did not feel, however, that we could condemn those who have died for their freedom in Hungary as they were martyrs for a great cause, [less than 1 line of source text not declassified] we must not appear to condone Russian policies in Hungary or condemn the rebels. He mentioned that the communiqué drafters would have to handle this problem with care.

Far East

Mr. Lloyd opened the discussion saying that this would be a preliminary run since the Prime Minister wished to discuss this problem further himself. He noted the existence of “virtual unanimity” among both political parties in the U.K. on China trade. He pointed out that that it was becoming extremely difficult to explain the “China differential”9 in Parliament, and that the British people regard the Russians as their principal enemies rather than the Chinese. He mentioned that the British had made considerable use of the exception procedure but that there was little room for further expansion in this direction. Lloyd said that the British now feel very strongly that the time has come to abolish the differential. He maintained that the present controls harm the free world more than they do the Communists and hence are a political liability. He foresaw little chance that a free Malaya or Hong Kong would be willing to operate under a control [Page 732] system in which the China differential was maintained. He said the British also believe the existence of the differential brings the whole system of trade controls into disrepute, making it harder to maintain them against the USSR and increasing the possibility of the disintegration of the entire system. He said that the U.S. is practically alone in attempting to maintain the differential and that our attitude leads to anti-American feeling in Britain. Lloyd stated that the British and Americans had talked about this question thirteen months ago in Washington10 and had agreed to an item-by-item review designed to see where relaxations could be made. He said that this examination had produced no results and that Britain could not hold on to the differential much longer. Moreover, he added the British do not believe it is right to do so. He said that the only reason they have stuck to the differential as long as they have was to keep their policy aligned with ours.

The Secretary said that this was a hot subject with us too, although the domestic problem is reversed here. He noted that the emotional feeling in the U.S. about China is stronger than the feeling about Russia due primarily to the casualties suffered during the Korean war and to imprisonment of U.S. civilians by the Chinese Communists. He said it is less a question of intellectual justification than of emotional feeling. The Secretary stated that nevertheless we have been giving renewed consideration to the “possibility of getting rid of the differential”, perhaps by adding a few items to the list and getting rid of the balance. He said that we could not discuss our plans in detail until Congress has been consulted but that we hope to be able to take a fresh international position on this matter within a couple of weeks. The Secretary added that if it could be made clear that an economic shift of this type does not presage a political shift and if at the same time the U.S. and the U.K. could get closer together on the political side it would help us a great deal.

Mr. Lloyd asked whether the Secretary intended this move on the political side to be public and was answered in the affirmative. Then Mr. Lloyd said “many words would have to be eaten in the U.K.” and that considerable public education would be required.

The Secretary noted that if we should bring Communist China into the UN it would make the problem which has arisen with the entrance of new members into the UN even worse. He said that neither our own interests nor the requirements of the Charter would be met by seating Communist China. He noted that the British have gone along with the moratorium thus far but that it has appeared to us [Page 733] that they were doing so unwillingly. If their support could look more genuine it would help us with the economic problem of the differential.

Mr. Lloyd stated that the change in composition of UN membership has changed many U.K. views. He said now that we have no Western working majority, the Chinese Communist capacity for mischief would be even greater.

The Secretary suggested that the British might now give some thought as to whether we could strike a balance on these two items. He observed that our positions in Asia have little depth and that people out there are becoming nervous over whether we will accept the Chinese Communists. He added that it was for this reason he gave his recent speech in Canberra on the subject of Communist China which he had not originally intended to do.11 Mr. Lloyd stated that the British position on the moratorium would become easier if we could give ground on the trade side, but that it should not look publicly as though we were striking a bargain. Secretary Dulles said that the morning’s communiqué should avoid discussion of this matter.

  1. Source: Department of State, Conference Files: Lot 62 D 181, CF 867. Secret. Drafted by Dale and circulated to appropriate U.S. officials on March 22. The Delegation at Bermuda transmitted a summary of this conversation to the Department of State in Secto 14, March 23. (Ibid., Central Files, 611.41/3–2357)
  2. The Council of the WEU met in London on February 26 and again on March 18 to discuss the British force cuts.
  3. Reference is to the report of the Foreign Ministers of Canada, Italy, and Norway, December 11–14, 1956, on ways and means of improving and extending NATO cooperation in nonmilitary fields.
  4. Reports of Gaitskell’s speech at the Free University of Berlin, March 18, in which he called for the establishment of a neutral zone for Europe, are in telegram 5060 from London, March 21. (Department of State, Central Files, 740.5/3–2157)
  5. The Working Group, composed of experts from the United States, United Kingdom, France, and the Federal Republic of Germany, considered the problem of German reunification, in Washington, March 6–15. Its report is ibid., 762.00/3–1657.
  6. Elections to the Bundestag were held on September 15.
  7. Substance of the ElbrickHood report was transmitted to the Department of State in Secto 16 from Bermuda, March 23. (Department of State, Central Files, 740.5/3–2357)
  8. For documentation on the negotiations with Poland which began on February 26 in Washington and resulted in agreements to provide Poland with $95 million in aid, see volume xxv.
  9. The list of strategic items banned for export to Communist China was larger than the list of items banned for the Soviet Union. The difference was the “China differential.”
  10. See Document 226.
  11. For text of Secretary Dulles’ speech before the SEATO Council, March 12, see American Foreign Policy: Current Documents, 1957, pp. 1116–1117.