79. Memorandum From Secretary of State Herter to President Eisenhower0
SUBJECT
- Proposed United States Initiative to Mobilize Free World Resources for Development and to Strengthen Trade Relations
The great—even startling—changes in the international economic situation over the past two years have created two new problems of major dimensions for our foreign policy.
1. The first is: how can we mobilize the energies and resources of the other industrialized countries to assist the development of Asia, Africa, the Near East and other development-hungry parts of the Free World?
The enormous task of developing these areas must go forward or we will, in the end, lose out to the Communists.
The United States cannot provide the needed capital alone.
On the other hand, Western Europe and Japan, because of the great improvement in their monetary reserves—the reverse of the large payments deficit of the United States—are now financially capable of mounting a sizable effort which could powerfully assist our own, thereby greatly adding to the over-all strength and cohesion of the Free World.
What steps can the United States take to enlist the full cooperation of Western Europe and Japan in making this effort?
2. The second problem is: how can we help to redirect the emerging trade rivalries within Western Europe into constructive channels [Page 173] which will reinforce rather than weaken world-wide trade and avoid the present risk of serious harm to our exports and those of other friendly countries outside Europe?
The European Economic Community (The Six), which the United States has strongly supported for political as well as economic reasons, is now being challenged by a new trade bloc of seven European countries (The Seven) under the de facto leadership of the United Kingdom.
The antagonisms between the Six and the Seven might develop into a trade war which could gravely divide our NATO partners on political and security issues.
On the other hand, the Six and the Seven might feel compelled to compose their differences by trade deals which would discriminate against the exports of the United States and other friendly countries.
To help guide present European trade developments into more constructive channels beneficial to world trade will require the United States to abandon its present passive role and exercise determined leadership.
The Department of State has considered carefully the courses of action open to the United States in attacking successfully these major new problems in the field of development and trade. We have concluded that the most effective course would be for the United States to take the initiative in proposing the reorganization and revitalization of the Organization of European Economic Cooperation (OEEC) and to announce the willingness of the United States to assume full membership in this revitalized institution. (The United States and Canada now participate only in an associate capacity.)
This action would symbolize our determination to work with Western Europe on the basis of full partnership in attacking the major problems of development and trade. It would constitute an act of creative United States leadership in a recently deteriorating situation. It would greatly increase the opportunity of the United States to influence the makers of European economic policy in two directions—greater European development efforts and actions to compose European trade quarrels on a basis consistent with sound world trade relations.
A reorganized OEEC would need to have a new name, and would have to provide for some form of participation by Japan.
United States membership in a reorganized OEEC would require some form of Congressional action. However, United States commitments would not go beyond acceptance of basic objectives and agreement to discuss and provide information. It is assumed that Canada would follow the United States lead and also become a full member.
[Page 174]A more detailed description of this proposal is enclosed.1
The general outlines of this proposal have been discussed with Secretary Anderson, who concurs. If you approve, consideration should be given promptly to the method and timing of a public announcement of our intentions possibly in your State of the Union message.