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Volume 8 1945~1948

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No. 381 NAI DFA 305/57 Part 1

Report by Frederick H. Boland on the Committee on European Economic Co-operation

Paris, 9 August 1947

  1. Only four of the sixteen countries at the Conference succeeded in furnishing their replies to the Technical Questionnaires before midnight on the 3rd August - the time limit set by the Co-operation Committee. Ireland was one of the four. The other three were Britain, Switzerland and Denmark. Switzerland beat us by about half-an-hour for the honour of being the first country to send in a complete reply. But we were the second; and I think the Departments concerned have every reason to congratulate themselves on a result which must certainly tend to give other countries a flattering impression of the relative efficiency of our Governmental machine.
  2. Apart from its punctuality, our reply appears to compare more than favourably with those of other countries in point of clarity and comprehensiveness. Mr. O'Connell who, as President of a Technical Commission, has had to examine other replies in detail, and is in close touch with the technical experts dealing with these matters, tells me that our returns, if not the best, are among the best, only those of Britain and the Netherlands equalling them in quality.
  3. In the event, the time limit set by the Co-operation Committee proved optimistic. Many other replies came in on Monday and Tuesday, but several of them were incomplete. The Greek reply was only available to delegations this morning and the replies of Iceland, Turkey and Portugal have had to be sent back for amendment and completion. Several countries, such as Portugal, considerably delayed matters by sending in a single copy of their reply in spite of the specific request made to Governments to furnish a sufficient number to permit of immediate distribution. On the whole one gets the impression that the timetable set a fortnight ago is becoming more and more difficult to maintain and that, although technical committees, and drafting and statistical sub-committees, are now working all day and every day in a feverish effort to keep up, the preparation of the final report will be a bigger and longer task than was originally thought.
  4. So much for the technical side of the Conference. On the political side, the picture at the moment is no brighter. When I arrived yesterday afternoon, I found that the time for the Co-operation Committee Meeting scheduled for this morning had not yet been fixed, and that on the contrary all committee and sub-committee meetings fixed for yesterday afternoon had been cancelled at an hour's notice without explanation. It soon became apparent that there was a severe crisis in the political background of the Conference, and that this crisis centred on what has been from the beginning the 'point néuralgique' of the whole question of Western European Co-operation - that is to say, the problem of the level of industrial production, particularly steel production, in Western Germany.
  5. Attempting to isolate the essential issue from the volume of argument and speculation to which this development has given rise, the difficulty may, I think, be stated as follows. All the States at the Conference with the exception of France (and from this statement I assume that we are not to be excluded ourselves) are definitely of the opinion that no plan for the economic rehabilitation of Western Europe is likely to achieve its object unless it provides for the early restoration of a viable economic order in Western Germany. It is generally understood that this is also the view of the US Government. The establishment of a sound economic order in Western Germany depends on an increase in Western-German steel production. Western Germany could not live if, deprived of its steel industry, it had not only to forego a valuable export trade but had actually to depend on imports for the steel requirements of its other manufacturing industries.
  6. The Potsdam Conference fixed a ceiling of 5.8 million tons for German steel production. This compares with an annual production of 12 million tons in 1925, 6 million in 1932 (at the nadir of the world economic depression) and 22.5 million on the eve of the war. According to our information, the British and Americans are now anxious to see the level of Western-German steel production raised to a figure of 12 million tons per annum.
  7. To such an increase the French are firmly and, it would seem, uncompromisingly opposed. To the French mind, the steel production of the Ruhr valley has always represented a deadly threat to French security. If the Marshall plan were likely to result in putting the Ruhr industry on its feet again, it would alarm French opinion so much that the Communist party here, who of course are out to wreck the plan if they can, would be armed with an irresistible weapon against the present Government. There is the problem.
  8. The French have a suggestion of their own for its solution. They point out that, while the Ruhr has the best coal deposits in Europe, it has no ore. It imports a substantial portion of its iron ore requirements from the Briey basin in Lorraine, one ton of Ruhr coke and 3½ tons of Briey ore going to make one ton of Ruhr steel. Is it not more logical, the French ask, that instead of 3½ tons of Briey ore going to the Ruhr, one ton of Ruhr coke should come to the French steel industry in Lorraine? Even allowing for the subsequent export of steel for use in other German manufacturing industries, the transport involved would be only 2 tons instead of 3￿. The French solution is, therefore, that Ruhr steel production should continue to be limited to 5 or 6 million tons but that the levels of French steel production contemplated under the Monnet plan (7 million tons in 1947 and 11 millions in 1951) should be raised to permit of an annual export of 4 million tons of raw steel from France to Germany.
  9. This French suggestion, so agreeable to the logical bent of the French mind, pleases nobody else and offers no solution at all. It doesn't solve Western-German payment difficulties. Benelux is opposed to the multiplication of steel productive capacity which it involves. The scheme has no attractions for the states which are anxious to see Western Germany restored as an export market - states such as Denmark for her agricultural products and Sweden for her iron ore.
  10. And so the debate continues. It is generally assumed here that the abrupt cancellation of yesterday's meetings was the result of an order issued direct from the office of the French Premier, M. Ramadier, and was an indication of the French Government's professed indignation at a joint Anglo-American Note delivered last week asking the French Government to submit its views about the level of Western-German industry in writing for consideration by the two Governments. The implied intention to treat France as standing on a lower level of importance in this matter than the other 2 Powers (even though it is the economic position in the joint Anglo-American Zone that is involved) deeply wounded and annoyed the French. Sir Oliver Franks flew to London yesterday for consultation and meetings were resumed as usual this morning. We understand now that last week's Note is to be forgotten and that tripartite talks are to take place immediately on the problem of Western-German industrial production.
  11. That is all to the good. If that problem can be satisfactorily settled, the principal political difficulty threatening the success of the present conference will be out of the way. But it is difficult to feel optimistic. Like other delegates to whom I have spoken, I feel that yesterday's rather dramatic development was tantamount to an open declaration by the French Government of its willingness even to bear the responsibility for a failure of the present conference rather than abandon its fundamental position on the question of the restoration of Western Germany's steel industry.
  12. We handed in our reply to the Timber questionnaire this morning. Mr. Colm Barry is dealing with the points raised on our Balance of Payments statement. Mr. O'Connell's Commission has made better progress than the others, although some difficult questions of principle have arisen and have yet to be settled in connection with the statement of European requirements of cereals, oils and fats and other commodities in short world supply. A draft outline of the first part of the general report of the Conference is now available, and we at present have it under study.
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