Foreign Relations of the United States, 1964–1968, Volume XV, Germany and Berlin

115. Memorandum of Conversation¹

Washington, June 4, 1965, 11 a.m.

SUBJECT

• Trade with Eastern Europe and the Zone

PARTICIPANTS

• Germans
  • Dr. Ludwig Erhard, Chancellor of the Federal Republic of Germany
  • Dr. Gerhard Schroeder, Federal Minister for Foreign Affairs
  • Ambassador Heinrich Knappstein, German Embassy
  • Dr. Karl Hohmann, Assistant Secretary; Chief, Planning Staff, Federal Chancery
  • Dr. Horst Osterheld, Deputy Assistant Secretary, Office of the Chancellor
  • Dr. Dankmar Seibt, Deputy Assistant Secretary, Personal Aide to the Chancellor
  • Mr. Georg von Lilienfeld, Minister, German Embassy
  • Mr. Karl-Guenther von Hase, State Secretary; Federal Press Spokesman
  • Dr. Klaus Simon, Aide to Foreign Minister Schroeder
  • Mr. Jorg Kastl, Foreign Ministry Press Spokesman
  • Mr. Ulrich Bewerunge, Press Officer, Federal Press &Information Agency
  • Mr. Hermann Kusterer, Interpreter
  • Mr. Heinz Weber, Interpreter
• Americans
  • The Secretary
  • Under Secretary George W. Ball
  • Ambassador George C. McGhee
  • Ambassador Llewellyn E. Thompson, S/AL
  • Mr. John M. Leddy, Assistant Secretary,EUR
  • Mr. Robert C. Creel, Deputy Assistant Secretary, EUR
  • Mr. Alfred Puhan, Director, GER
  • Mr. Richard B. Finn, Deputy Director,GER
  • Mr. Harry Obst, Interpreter

The Chancellor spoke of his pleasure at being here. He said that he was certain the Secretary knew how keenly he felt about the Alliance. He referred to his upcoming talks with de Gaulle which he said would not be easy. They would concern not only the problems of the Six, but the problems of NATO. The Chancellor felt it was not necessary this morning to mention the German problem in particular. He was grateful, as the Secretary knew, for the recent statements by the President and other American leaders on the German problem.

The Chancellor said he had one question he wished to explore with the Secretary. He stated that one heard a great deal today about the relations of the West with the countries of Eastern Europe. de Gaulle, according to the Chancellor, had described the solution to the German problem in terms of a better relationship between the East and West. The Chancellor said it was his view that the Eastern European countries had their own identity, were national states whether Communist or not and that they threatened the FRG with giving equal treatment to the GDR. In the US, Chancellor Erhard said one hears more and more that commercial relations with these Eastern European countries are useful. He referred to an article in Life by Professor Brzezinski.² The Chancellor said the FRG was not hostile toward the Eastern European countries, but it was premature to speculate regarding diplomatic relations between these countries and the FRG. He felt the time for such action was not opportune. He thought that in view of the rupture of relations caused with the FRG by ten Arab states and the upcoming Algiers conference of Afro-Asian countries,³ any speculation regarding the establishment of diplomatic relations between the FRG and the Eastern European countries would only create an atmosphere of uncertainty.

The Chancellor asked if all Western European countries grant long term credits to the Eastern European states, what will be achieved? Are we not basically deceiving ourselves into thinking that we may achieve German reunification in this way? He felt it would be difficult to explain such actions to the German people. He thought that even when viewed from a long range point of view, it was necessary for us to proceed with great caution. If everybody gives long term credits to the Eastern European states, what will they do with these credits? Perhaps they will increase their armaments.

The Chancellor asked if it was not to be expected that the Soviets would increase the pressure on the Eastern European countries as we are trying to develop better relations with them. The Chancellor asked, as an economist, when and under what conditions would these Eastern European countries be ready to repay the credits extended to them? He was concerned that the position of the creditors would in the last analysis be worse than that of the debtors. We would be forced to continue giving them credit in the hope of getting repayment. He warned that we could not give them the impression that we are doing this as a gift. He voiced the necessity for the development of an economic strategy in this field, a strategy based on a study of the results achieved. He asked if granting credits has resulted in greater readiness to move away from the USSR. Had the chances for German reunification actually improved? Or are these Eastern European states making use of these funds to undermine the Western position? Were they financing armies of liberation in other parts of the world? He said he felt ill at ease at these thoughts.

The Secretary replied we saw considerable advantage in more relaxed relations between East and West Europe, including improved relations between the Federal Republic of Germany and the Communist states of Eastern Europe. He believed important developments were taking place in Eastern Europe. The smaller Eastern European countries have achieved a considerable degree of national autonomy. This is decidedly to our advantage. The Secretary felt there was underlying nostalgia in Eastern Europe for greater association with the West in the cultural, intellectual as well as other fields. The Secretary said the role of the US in such a policy toward Eastern Europe is fairly restricted. US trade with Eastern Europe is only a small fraction of Western European trade with that part of the world. It was not easy for us to change this situation. There was legislation governing our trade with Communist states. Congress would want to look with great care into any change of this situation. Moreover, the attitude of Eastern Europe toward us cannot help but be affected by developments in other parts of the world—in Viet-Nam and Cuba, for example. Some Eastern European countries, the Secretary suggested, may stand aside in conflicts involving us with the Communists in other parts of the world, but a crisis like that of Viet-Nam imposes inevitably limitations on us to improve the atmosphere, the relations between us and Eastern Europe.

The Secretary expressed his full agreement with the Chancellor on the problem of credits to the Communist Bloc. He said that we and the Federal Republic had tended to view the problem in the same light, but that we have often been disappointed by the positions taken by other NATO powers. He felt it would be unfortunate if there developed in the West a policy of giving easy credit terms to Eastern Europe. He said when credits became aid, we were making a mistake in our priorities. We should obviously not increase the capacity of Communist strength until the prospects for much better relations with the Bloc looked brighter. The Secretary felt that the idea of a détente had gone far beyond the facts. He cited the nuclear test ban treaty as a stimulus to the notion that a détente had been reached. To prove that this was not so, he cited crises which had arisen since that time. He said there were indications the Soviets may press us on Berlin again. He reminded the Chancellor of Gromyko’s suggestion that there be four-power talks on Berlin. Gromyko, he said, also tried to have bilateral talks with us on Berlin and our position there. The Secretary said he gathered Gromyko in Paris took up the German and Berlin questions, hinting that the Soviets were growing impatient. The Secretary added that we had intelligence reports concerning very large military maneuvers in Eastern Germany, suggesting that we might find ourselves again with very great pressure over Berlin. It was thus important for NATO to try to talk out in some detail the wide range of questions affecting our relations with Eastern Europe. He deplored the absence of a strong Western policy on this subject and the tendency to create confusion.

The Secretary said, in summary, we have noted a steady relaxation of tensions in Eastern Europe which made for better East-West relations. He said our role in increasing this better relationship would be somewhat restricted. He believed this subject should be discussed further in NATO. The Secretary asked Mr. Ball to comment further on this subject.

The Under Secretary referred to the difficulties which the Federal Republic had encountered when it sought to take the lead with Belgium in restricting credits to Eastern Europe to the Berne Union rules. Mr. Ball said we made our support of this position clear and tried to persuade our NATO partners to agree. The UK, however, would not make any distinction between credits to Eastern European countries and to others. As a result, a split developed within NATO with the UK followed by the French and the Italians going beyond the Berne rules. The result was that we had no common policy, which was a matter of great regret to us. Our suggestion to have the Berne Union rules accepted as a standard was taken up in the OECD. The British showed little sympathy for this suggestion. Subsequently, Mr. Leddy undertook to push this further, but I am not very sanguine as to what might be accomplished.

Mr. Leddy said the UK would go along with general rules applicable to all, but was afraid they would want to grant credits for as much as ten years. We feel it was appropriate to limit them to five years.

Mr. Ball added that as long as we have members of the Alliance who believe in no discrimination, it would be very difficult to develop a common policy.

The Secretary said he wished to add that it was important to draw distinctions between the smaller countries of Eastern Europe on the basis of the role they played in Communist conspiracies in other parts of the world. For instance, Rumania was quite inactive, whereas the Czechs were very troublesome.

The Chancellor said he would like to speak about the Soviet Zone of Occupation of Germany. He said we heard more and more about FRG trade with the Zone. In this connection, he wished to make it clear that interzonal trade was not a matter of choice for the FRG, was not engaged in for economic reasons. The FRG undertook originally to help Germans in the Zone when the FRG was literally the only source for aid. Now, he said, the situation had changed and the Zone can buy more from other countries which has altered zonal trade a considerable degree. If the GDR gets long term credits, it will in turn be able to offer credits to countries like the UAR (350 million marks) to Indonesia and Tanzania. By enhancing the economic status of the Zone, the West will in turn permit the GDR to enhance its political status with countries like those above by assisting them economically.

The Chancellor added he agreed with the Secretary in making a clear distinction between the Zone and the Communist Eastern European states. Referring back to trade with the Communist Bloc, Erhard said that even viewed from a businessman’s point of view, it was a bad bargain. He urged that we look at trade with the Bloc from an economic point of view. He saw disaster ahead if developments in the trade field in this area were not kept under control. He noted there was already competition in Western European countries to grant credits to Eastern Europe, a ridiculous situation.

The Secretary said he did believe trade with the Zone represented a special case. He thought that this affected us very little since the volume of trade between us and the Zone was so small and so much less than that of Western European countries with the Zone.

The Secretary asked the Chancellor how he saw the so-called co-production schemes like those of Mr. Beitz in Poland. Would they involve long term credits?

The Chancellor thought the possibilities of anything coming of these schemes were rather limited. He envisioned no great opportunities for Krupp. He again suggested that it would be up to the OECD to achieve better coordination in the general field of trade with Eastern Europe. He suggested that these countries could offer mainly agricultural products only. The EEC was not in a position to expand its imports of agricultural products to any substantial extent. How were they going to repay the credits?

The Secretary assured the Chancellor that we had no intention of relaxing our limitations on credits to the Communist Bloc. The Chancellor warned that German industry would try to emulate the actions of other countries. He pointed to FRG trade with the Eastern Bloc as representing only four per cent of the total German volume. Before Hitler, German trade with the same area was twenty per cent of the total volume.

The Secretary asked Mr. Leddy if there were any possibility of getting neutral countries like Switzerland and Sweden to agree on credit terms if there was no unanimity in NATO.

The Chancellor interposed the suggestion he was skeptical that neutrals like Switzerland and Sweden, who were so sensitive lest they be accused of being drawn into Alliances, would be influenced by NATO decisions. He thought the most useful forum was the OECD where the situation could be discussed in sober commercial terms without openly mentioning the political angles.

Mr. Leddy expressed complete agreement with the Chancellor. He said that our efforts to achieve an agreed policy in NATO had made no progress. To get the neutrals in, you would have to proceed on a commercial basis. He agreed fully it was wise to pursue this in the OECD and to see how far we could get.

1. Source: Johnson Library, National Security File, Country File, Germany, vol. 8. Confidential. Drafted by Puhan and approved in S and U on July 8. The meeting was held in the Under Secretary’s conference room. The source text is marked “Part 1 of 4”; memoranda of other portions of the conversation are ibid. A memorandum of conversation of the portion of the discussion dealing with France and NATO is Document 116.
2. Not found.
3. The Conference was held October 28–November 2. It ended without any agreements.