Foreign Relations of the United States, 1958–1960, Western European Integration and Security, Canada, Volume VII, Part 1

91. Memorandum of Discussion at the 429th Meeting of the National Security Council⁰

December 16, 1959.

[Here follow a paragraph listing the participants at the meeting and agenda items 1–2. Vice President Nixon presided at the meeting.]

3. Relations Between the Common Market Area and the Outer Seven Countries

Mr. Gray noted that Secretary Dillon had recently returned from a whirlwind trip to Europe and asked whether Mr. Dillon would care to brief the Council on his trip.

Secretary Dillon reported that he had felt it worthwhile to make the trip because differences of opinion were building up between the two trade groups—the Common Market and the Outer Seven. These differences of opinion involved danger to the western alliance, as well as the purely economic danger that as the problem became more serious the Europeans would decide that the best way to settle it would be to conclude bilateral deals discriminating against the U.S. The difference of opinion was a serious split and was extremely complex. Last year the U.K. had emphasized economic problems, but was now relaxed so far as economics was concerned and was taking the attitude that the Common Market was a political means of tying Germany and Italy to France. The U.K. was arguing that growing political ties among the Common Market countries would lead to a split in Europe. British policy is probably based on a distaste for a rising continental bloc, but the British do not know what to do. According to the Germans,¹ the U.K. has threatened Germany with serious military and political consequences. Lloyd practically repeated these threats to the Secretary.² The U.K. has related British forces on the continent to this problem. The smaller countries among the Outer Seven are concerned about economic matters and want to do something because their trade is largely with the Six. Within the Common Market, there is a similar split in that Germany sees the problem as a political one and wishes to push the Common Market and not submerge it in a wider group. The Six are not prepared to accept a wider free trade area, while the U.K. is not prepared to join the Common Market. Some way must be found to compromise these differences. We think it is best to lower tariffs of the Common Market and use the most-favored-nation principle. It is important to us that the political split not continue and that there be no discriminatory deals against us. Secretary Dillon reported he had told the Europeans we were interested in this problem and were willing to take an active part in it. He thought the Summit Meeting might devise a mechanism for “talking out” the problem. During his trip he discovered that the danger of discrimination against the U.S. was more real than any of the European countries would admit publicly. The U.K., for example, had already put forward a suggestion for such discrimination. Secretary Dillon said he had also talked with the Germans about assistance to underdeveloped countries and the Germans had agreed they could do more. Germany felt that more coordination and discussion were required, not for the purpose of allocating amounts, but for the purpose of arriving at general patterns and mobilizing resources. Secretary Dillon reported that discriminations against the dollar are being further relaxed in Europe. France is undertaking a new action to ease such discriminations, while Britain will take similar actions in January and again in July.

Summarizing, Secretary Dillon said the main result of his trip had been to elicit a welcome on the part of the European countries to the idea of an active U.S. role in connection with relations between the Common Market and the Outer Seven. All countries realized they were treading on dangerous ground. It was his feeling that continued discussion might result in finding a way out of the difficulties without serious repercussions. However, this problem was an emotional matter so far as the British were concerned. Mr. Dillon regarded the fact that he was able to see all the more important officials during this trip to Europe as an indication of how deeply the European countries felt about the problem.

Mr. Allen inquired about the attitude of Canada on this matter. Secretary Dillon said he had wanted to talk to the Canadians before undertaking his trip, but after first accepting an invitation to consult, the Canadians had declined to talk, probably because they felt the U.K. might think the U.S. was talking for Canada.

The Vice President asked whether Secretary Dillon had noted any reactions to the President’s trip.³ Secretary Dillon said the President’s trip received a big play in the European press and on his trip all the officials he had talked to had mentioned it.

Mr. McCone asked whether the Germans had indicated their views on the question of whether the proceeds of any assistance they extended to underdeveloped nations should be expended in Germany. Mr. Dillon said the Germans would probably insist on provision of aid partly on the basis of expenditures of the proceeds in Germany. The Germans were particularly interested in assisting Greece and Turkey and were willing to help with military assistance as well as economic aid. He reported incidentally that the Germans had offered to pay back to the U.S. ahead of time $200 million on GARIOA. We were not as keen about accepting this offer as we were about getting a German commitment to extend assistance to the underdeveloped countries.

Mr. Gray felt it was nonsense for the U.K. to relate British forces on the continent to the problem of the Common Market and the Outer Seven. Secretary Dillon said the British were insisting on a purely political basis that the countries concerned meet the British point of view.

Mr. Dulles asked whether the OEEC was defunct. Secretary Dillon said the OEEC was not defunct, but was identified as a U.K. tool, with a U.K. Secretary-General and a U.K. Chairman. It had lost some of its usefulness in the field after a controversy last year. The OEEC might perhaps be re-organized with a different cast of characters. The British gave some indication they might agree to such a re-organization.

The National Security Council:⁴

Noted and discussed a briefing by the Acting Secretary of State on his recent trip to discuss the subject with the Governments concerned.

[Here follow the remaining agenda items.]

Marion W. Boggs

0. Source: Eisenhower Library, Whitman File, NSC Records. Top Secret; Eyes Only. Drafted by Marion W. Boggs.
1. See Document 85.
2. See Document 81.
3. Eisenhower’s 11-nation good will tour December 3–23.
4. The following paragraph constitutes NSC Action No. 2165, approved by the President on December 23. (Department of State, S/S–NSC (Miscellaneous) Files: Lot 66 D 95, Records of Action by the National Security Council)