As I indicated in a recent report, the negotiations between the 16 countries taking part in the Conference came to be rather overshadowed last week by the negotiations taking place between the Conference's Executive Committee and the five American negotiators here in Paris - Messrs. Clayton, Douglas, McCaffrey, Kennan and Bonestal. These latter negotiations ended on Saturday evening when Mr. Kennan returned to Washington.

The results of the conversations with the American negotiators were the subject of a statement made to the Cooperation Committee this afternoon by its Chairman, Sir Oliver Franks. Delegates were specifically asked to treat the statement as confidential for the moment, but I understand that it is to be the subject of a communication to the press at an early date. According to Sir Oliver Franks, the American negotiators laid down, at the conclusion of the talks, the following seven principles to which, in their view, it was essential that the Final Report of the Conference should conform if it is to receive the approbation of Congress and American public opinion. Sir Oliver stated the seven principles as follows:-

1. That the aim of the four years' programme described in the Final Report should be to achieve a workable European economy;
2. That the American aid sought should show a continuous reduction over the four years' period of the programme;
3. That the Final Report should furnish solid evidence that the participating countries are making progress towards the production goals which they have set themselves;
4. That long-term projects (post-war reconstruction plans, etc.) should not be allowed to interfere with 'the full activisation of existing productive capacity';
5. That the participating countries should mutually undertake to achieve, as quickly as possible, financial and monetary stabilisation within their own territories;
6. That the Final Report should confirm the willingness of the participating countries to 'take concerted steps to maximise trade and gradually eliminate trade barriers between themselves';
7. That the participating countries should regard the work of recovery during the coming four years as common European responsibility and should set up a 'multi-lateral organisation to review the execution of the recovery programmes undertaken in accordance with the Report'.

Sir Oliver informed the delegates that the American negotiators had put forward these principles as 'points which, if approved in the Final Report, would materially assist its acceptance' in America. I understand from the Dutch and Italian delegations, however, that the Americans put the matter a good deal more flatfootedly than that. They went as far as to say that it would be difficult for the administration to sponsor the final plan before the relevant Congressional Committees unless it gave effect to these seven principles.

So far as we are concerned, the conditions laid down by the American negotiators are not likely to give rise to much difficulty! The people most concerned are the British, the French and the Scandinavians. It is an open secret here that the American administration think that the Labour Government in Britain are unduly influenced by the attitude of the left-wing trade unions in Britain and are not doing as much as they could do to get a higher output from British labour, particularly British coalminers. The 6th of the seven American points (financial and monetary stability) is aimed against France. The most difficult of the American points, however, - and the one to which Mr. Clayton attached most importance - is the last, namely, that this Conference should not completely atomise itself as soon as the Report has been presented, but that a standing organ of the 16 Governments represented here should remain in being to supervise the process of European recovery over the next four years, and consult with the American Government about the administration of whatever aid is eventually extended in accordance with Mr. Marshall's offer. This last point threatens to split the solidarity of the 16 participating countries because at least two members of the Scandinavian group - Sweden and Norway - are rigidly opposed to any continuance of the present Conference, in any form, after the presentation of its Final Report, as smacking too much of the creation of a 'Western Bloc'. If Norway and Sweden stand out, it may make things difficult for Switzerland.

Sir Oliver Franks merely conveyed the opinion of the American negotiators to the Conference this afternoon. There was no discussion on the subject. It may be expected, however, that the influence of the Americans' insistence on the seven points enumerated above will be strongly reflected in the draft sections of the Final Report which I will be forwarding to the Department at they become available within the course of the next 4 or 5 days.