Foreign Relations of the United States, 1958–1960, Eastern Europe; Finland; Greece; Turkey, Volume X, Part 2

60. Memorandum From the Assistant Secretary of State for European Affairs (Merchant) to Secretary of State Dulles ⁰

Washington, January 16, 1959.

SUBJECT

• Economic Negotiations with Poland

In connection with the decision that FY 1959 MSP contingency funds allocated for Poland be maintained at $15 million, my memorandum to you of November 22, 1958 (Tab A)¹ set forth the basic reasons why we consider the extension of further economic aid to Poland to be in the United States interest. This position was adopted notwithstanding certain public attacks against the United States by the Polish leadership in backing up Soviet policy with regard to the German problem, particularly the Soviet-Polish communiqué issued following Gomulka’s visit to the USSR in November.² The memorandum also recommended that the opening of economic talks with the Poles, originally scheduled for November or early December, not be delayed indefinitely but only long enough to impress upon the Polish Government our sharp disapproval of Gomulka’s offensive remarks about the United States.

Our dissatisfaction with Gomulka’s statements and their mutually disadvantageous effect on US-Polish relations have been made clear by Department officials in discussions with the Polish Under Secretary for Foreign Affairs during his recent visit here³ and with the Polish Ambassador. Our views have likewise been made known to the Polish Foreign Office by Ambassador Beam, and it may be noted that statements by Polish officials have since been more restrained, even during the course of the December visit to Warsaw of Ulbricht, First Secretary of the GDR Communist part.⁴

In these circumstances it would seem that nothing further is to be gained in connection with our objective of registering our disapproval to the Polish Government by continuing to delay the opening of economic aid talks with the Poles.

It is planned to initiate negotiations shortly to obtain a lump-sum settlement by Poland of American property claims against Poland, and to link the aid negotiation to the progress of the claims negotiation so that there will be an inducement to the Poles, through the prospect of aid, to made a prompt and satisfactory claims settlement. We anticipate that the aid talks, once started, can be completed in a relatively short time, and certainly within two months. We therefore propose that (1) discussion of the lump-sum settlement be initiated promptly on the basis set forth in the attached instruction to Embassy Warsaw (Tab B),⁵ and (2) we open the aid negotiations as soon as it is apparent that the Poles are prepared to consider our proposal as a basis for serious discussion of a claims settlement. We do not contemplate that the economic aid negotiations would be concluded until after a satisfactory solution to the claims settlement has been reached, or alternatively, until such time as we are satisfied, and can make a statement of the situation which would presumably satisfy Congressional and public inquiries, that the claims negotiations offer reasonable prospect of successful conclusion.

We propose that, before beginning aid negotiations, Congressional sentiment should be sounded out regarding further aid to Poland. As in the two preceding economic negotiations with the Poles, approaches would be made to the Senate Committee on Foreign Relations and the House Committee on Foreign Affairs. In connection with obtaining Congressional reaction, it is of interest that an official of the Polish-American Congress recently advised the Department that his organization, and the Polish-American community in general favored continued economic aid to Poland. He also said that, in his view, those members of Congress most concerned with Polish-American groups in this country favored continuance of aid to Poland.

It is proposed that, at the same time, we explore Congressional views toward the extension of most-favored-nation treatment to Poland.⁶ If the results of such consultation are favorable, we propose to consider the advisability of extending MFN to Poland, on a unilateral basis, at such time as it may be considered that this action will have a maximum advantage from our standpoint. We have in mind that the extension of MFN would give the Poles concrete evidence of our intention to expand trade relations, and, by improving their prospects of earning more dollars in the United States through increased sales, would assist our negotiations for a settlement of property claims.

With respect to the basis for further economic aid, it is noted that $15 million is reserved for Poland from the FY 1959 contingency fund, and it is believed that funds, as well as commodities, will be available under PL 480. In this connection, it is planned that further aid under PL 480 will be less than in either of the previous economic agreements.

Recommendation: ⁷

(1) That negotiations for a lump-sum settlement of American claims for nationalized property be initiated promptly in Warsaw.

(2) That we open the third round of aid talks as soon as it is apparent that the Polish Government is prepared to consider our claims proposals as a basis for discussion of a settlement.

0. Source: Department of State, Central Files, 748.5–MSP/1–1659. Secret. Drafted on January 16 by Beale, Colbert, and Henry P. Leverich of the Office of Eastern European Affairs, and concurred in by the Assistant Legal Adviser for International Claims, the Assistant Legal Adviser for Economic Affairs, and the offices of the Assistant Secretary of State for Congressional Relations, the Assistant Secretary of State for Economic Affairs, and the Deputy Under Secretary of State for Economic Affairs.
1. Not found attached.
2. See footnote 2, Document 56.
3. see Document 58.
4. An East German Communist Party delegation led by Walter Ulbricht visited Poland December 9–14.
5. Not found attached. This was apparently a draft of instruction A–263 to Warsaw, February 18. (Department of State, Central Files, 248.1141/2–1859)
6. The United States had withdrawn its extension of most-favored-nation treatment to Poland on January 5, 1952. The action was taken in accordance with sections 5 and 11 of the Trade Agreements Extension Act of 1951 which provided that the President should withdraw the benefits of trade agreement concessions “to imports from the Union of Soviet Socialist Republics and to imports from any nation or area dominated or controlled by the foreign government or foreign organization controlling the world communist movement.” (65 Stat. 72)
7. Dulles indicated his approval of the recommendations with a checkmark.