2. The decisions taken at this three-day meeting of the Ministerial Council will be the subject of several succeeding despatches. It may help to understand the inner meaning of some of these decisions if I relate some of the circumstances in which the meeting was held and the motives (often mixed) which seem to have governed the attitude of the various delegations. Many of the actual decisions, as usual, involve the establishment of new committees and the laying of plans for new enquiries. For the sake of convenience, I shall begin by listing in summary form the specific accomplishments of the meeting.

(a) The Council approved and agreed to act upon a report designed to implement the Ministerial Declaration of August 1951 in favour of an expansion of production in Europe of 25% over the next five years. This report includes among other things specific recommendations to Member countries as a group with respect to the targets they should aim for in key sectors of the economy (steel, power, housing, agriculture, etc.) and the devices by which such increased production can be achieved.

(b) The Council approved a report of a special Ministerial Committee on coal production in Europe which indicated that, as a result of their enquiries, producing countries had succeeded for the most part in setting higher targets for actual production, with the probability that Western Europe could be independent of American imports by 1954, always provided that certain promised measures were taken and certain priorities established.

(c) The Council decided to continue the European Payments Union in operation and reached certain broad conclusions with respect to the manner in which the Union should operate in the future. In particular, the Council admitted the need for an increase in capital, recognized sadly that no future aid in this respect was likely to come from the United States, and moved a step towards the recognition of the fact that the Members, and in particular the debtors, must pay more gold and dollars into the Union.

(d) The Council approved a proposal for the settlement of the surplus which the Belgian-Luxembourg Economic Union is likely to develop with respect to the EPU for the period April to June 1952.

(e) The Council approved a document setting forth the future activities of the OEEC which involves, inter alia, a cut of roughly 30% in both expenditures and personnel.

(f) The Council adopted an American proposal to inaugurate an annual review of the economic position and prospects of Member countries and invited the United States and Canada to participate in this review (i.e. to permit themselves "to be reviewed"). This decision is discussed in more detail below.

(g) Council approved another American proposal for a high level study by the Organization of the measures needed to solve the problems of internal financial instability in Member countries, giving priority to the more serious cases. It is expected that this review will result in recommendations being made to governments, after the proposals have first been vetted by the small Ministerial Committee.

(h) The Council decided to set up a new and senior Steering Board for Trade somewhat after the model of the Managing Board of EPU. This group would possess the same responsibilities in respect to questions concerning the liberalization of intra-European trade as the Managing Board has in respect to payments problems in Europe and would be charged at the outset with the job of finding ways of bringing to an end the present retreat from liberalization, and reversing the movement.

3. For the most part these are still paper programmes or, what is even worse, no more than plans to make paper programmes. Nevertheless the decisions of the Council reflect a spirit of determination and enthusiasm which bas been lacking in the OEEC for some twelve months, and perhaps ever since it became apparent that rearmament had top priority in Europe and that the NATO might well become the key planning agency in the economic and financial sphere, perhaps even superseding the OEEC completely. Certainly in the months prior to this meeting, the atmosphere in OEEC circles both in the Secretariat and in many of the delegations had been gloomy. It was felt by some delegations that the Organization was being, or was likely to be , deserted by some of its key Members and associates, notably the British and Americans. The original proposals of the British to streamline the Organization and to cut OEEC staff and expenditures by 50% was regarded as evidence of this lack of interest. More important still, the OEEC has been facing critical conditions in Europe over the last year and was seemingly unable to do anything about it. Its original bold plans for trade liberalization had long since begun to falter and in recent months had received a severe setback as a result of the new trade restrictions imposed against their European partners by France and the U.K. At the same time the European Payments Union had had to face up to a critical condition almost every month as a result of the continuous deficits run by the U.K. and France and of the outward flow of gold required to settle the corresponding Belgian surplus. The problem of dwindling reserves had therefore been hanging over the heads of the Managing Board of EPU for many months and no sign of a solution was in sight.

4. Notwithstanding all their shortcomings, the trade liberalization programme of the OEEC and the European Payments Union could be regarded as the principal monuments to the validity of the basic OEEC approach to European integration. Consequently, the threat to these policies, together with the fear that the basic policies were being abandoned by many countries as being of less importance than rearmament had created a good deal of unhappiness both in the Secretariat and among some of the delegations. These fears were particularly evident in the case of the French government which, wedded as it is to the idea of European integration, to which it would like to give leadership, regards the OEEC as the proper vehicle for the conduct of a European economic programme. These fears were shared in some measure by all the Scandinavian countries, by all the non-NATO members and probably by Belgium and Holland. The U.K., of course, was regarded as the villain of the piece, the country which had always given only grudging support to the OEEC idea and the country which could expect to exert greater influence and perhaps receive greater support in and from an Organization to which the United States and Canada were completely committed. To some of the European delegations even the U.S. was now suspect because of what was believed to be its overriding concern with the question of rearming Europe. It should be added that an assessment of the attitudes and motives of Member countries in the Organization cannot be considered separately from the attitude of the personalities in the various delegations, including the American delegation, some of whom are bound to seek, consciously or otherwise, the maintenance of the importance of the institution to which they are accredited. This latter factor is not completely irrelevant in determining the attitude of some delegations towards the future of the OEEC. Finally, a more legitimate and defensible feeling existed on the part of some delegations and governments that the OEEC is a more inclusive organization than any other organization concerned with the problems of the European economy, that it has enjoyed a considerable experience in promoting intra-European economic cooperation and that for these reasons it is the most appropriate organization to undertake the responsibility for and supervision of the necessary programmes for increasing production and trade within Europe.

5. The United States government had seemingly become convinced of the need to resuscitate the OEEC and took advantage of this meeting of the Council of Ministers to make their position clear. This they did by frequent declarations to the effect that they attached the utmost importance to the work of the OEEC in the future and by taking the initiative in proposing resolutions intended to provide the OEEC with new activities, resolutions which seemed to demonstrate that the OEEC would continue to be the major organization charged with responsibility for intra-European economic problems. We were told privately in advance of the meeting that the U.S. intended to play a more active part in the OEEC than formerly. Mr. Draper's presence and intervention during the Ministerial meeting was an intimation of this attitude. My own impression is that the Americans did not realize the confusion and doubt that would arise later from the proposals referred to in paragraphs 6 and 7 below. As implied above, there was an element of stage management at this OEEC meeting. The importance of the agenda items alone would have warranted the attendance of a number of senior Ministers but this meeting was marked by the attendance of more than the usual quota of Cabinet Ministers. Messrs. Stikker, Butler, Pella, Draper, Van Zeeland, Lieftinck and Brofus [Brofoss] were present throughout the entire period and Mr. Schuman stayed longer than usual. The formal meeting of the Council was preceded by an informal and smaller off-the-record session called by the Chairman to discuss the "crisis" in OEEC affairs. Dr. Stikker spoke of the setbacks which the Organization had had to face, pointed to the uncertainties which beset the future of the OEEC and indirectly called for assertions of renewed support for the OEEC and for a concerted attack on the problem of financial instability which, in his opinion, was at the root of most of the difficulties of Europe. His request for assertions of renewed support was markedly successful. Pella, Schuman, Van Zeeland and Draper quickly followed one another with arguments for the continuance of OEEC on a very active basis and with some indication of the problems which need bold action by the OEEC. While one or two countries may have done no more than take their cue from the U.S., most countries, and especially the smaller ones and the neutrals, were quite convincing in their sincerity. The general theme was the fear of a return to bilateralism in trade arrangements if the liberalization programme could net be saved and if the related EPU system should collapse. A number of countries (including France, ironically enough) took up a proposal of the United States that the first problem to be tackled was that of financial instability and expressed their willingness to be exposed, albeit with all the necessary precautions, to recommendations from the OEEC in this field. It should be added that, whatever his private views, the public expressions of the Chancellor of the Exchequer at this private meeting and at the formal meetings, all gave support to the view that the OEEC had an important part to play in the future. The efforts of the U.K. were devoted to watering down the proposals for study and action put forward by the United States and other delegations. I should add that I thought it expedient to give assurances of Canada's keen interest in the continuation of the activities of the OEEC, mentioning in particular the programme for the 25% expansion in European production and the related trade liberalization measures. I pointed out that we saw no incompatibility or conflict in our association with OEEC and NATO and that in the economic field the objectives of both organizations were much the same. Moreover, OEEC had already done good work and acquired valuable experience in this field which none of us could afford to abandon. I think that our statement was particularly welcome to those delegations who may have felt that, in view of Canada's interest in Article II of NATO, we might have become negative in our attitude towards the OEEC. As a result of this off-the-record meeting, the proposals put forward at the more formal session for new OEEC activities in the near future were accepted, in principle at least, with less debate than would otherwise have been the case. In the minds of most delegations there was a feeling that the new undertakings were necessary to give effect to their desire to see OEEC grapple with the more urgent problems facing Europe today.

6. We shall be reporting in detail on most of the agenda items mentioned in paragraph 2 above. Something should be said, however, about the proposal to inaugurate an annual examination of the economic position and prospects of Member countries, together with the United States and Canada. This proposal, like the proposal to undertake an urgent high-level enquiry into the problems of financial instability, was put forward by the Americans. Both were supported with enthusiasm by other delegations. For some reason unknown to us and never made clear in the discussions, these proposals somehow came to be regarded as a symbol of the revival of the OEEC and if delegates were skeptical as to the usefulness of additional all-embracing enquiries they never expressed them publicly. As to the intentions of the United States in this connection, the position is a little obscure (the experience is net a new one). The American delegation spoke with different voices when I talked to different members privately, and appeared to give rather different versions of their intentions when speaking to different countries. The American delegation genuinely feels (and who will deny it?) that the most urgent economic problem in Europe, the one which has contributed most to the abandonment of trade liberalization and the crisis in EPU, is the failure to grapple with overspending and inflation in France, the United Kingdom and some other countries. It believes, therefore, that there should be a concerted European attack on this problem and that the way to begin is to make an appropriate diagnosis for the more ailing Members of the community, to determine the correct prescription and to try to bring concerted pressure on those Members to take the proper medicine. They wanted, at first, a Ministerial Committee after the fashion of Dr. Stikker's coal committee to look into the problem. In the end the Council preferred a top-level expert committee whose prescriptions would be vetted by a Ministerial group before being handed over to governments.

7. The more important of the two American proposals for additional work by the OEEC was its suggestion - one that was adopted without much discussion in the atmosphere of elation that followed the private meeting referred to above - to embark upon an annual review of the economic situation of Member countries. Coming from the American delegation and in order, therefore, to make it more palatable to others, there was tacked on to this scheme a proposal that the United States and Canada should participate. All that Draper said, or implied, was that it would be a good thing for the OEEC countries to expose their economic expectations and plans and to have them confronted by those of their partners. In this way the Organization might ensure greater cooperation and might be able to take steps for a joint attack on any difficulties which emerged as a result of the process of mutual "confrontation" of programmes.

8. The U.K. delegation realized very quickly, as did we ourselves, that such an annual economic review could have undesirable features from the point of view of those who were more concerned with the effective NATO operation in this field. It should be added, however, that none of these doubts came into the open since the American proposal was made without notice and at a time when the conference was exhausted from the preliminaries and because the Europeans embraced it enthusiastically and uncritically. In the short time we had to confer with them, the American delegation gave us a strong private assurance that they saw no reason why their proposal need worry NATO in the slightest degree. They gave the same reassurances to the British and in the formal meeting Butler requested and received from Draper a statement that this annual review was being suggested in the interests of the OEEC itself. The Americans told us that an annual review of this kind would lay bare the problems that needed to be tackled if European production was to be increased and financial stability assured, and that the raw material of the analysis could be turned over to NATO (thereby saving NATO a good deal of staff work) for the bigger and more political job of the kind practised by the TCC last Fall. Notwithstanding these reassurances, I do know that at least once delegation, e.g. Norway, understands (and is not displeased with the idea) that as a result of this decision the OEEC is now responsible for most of the economic analysis that would otherwise have been done by NATO. One is also aware of the fact that those countries who feel that the military influence in NATO is likely to be excessive, consider that non-military interests are more likely to be given proper expression if the analysis is done by the OEEC. One or two delegations also have the feeling that the American proposal for an annual economic review implies that the distribution of American economic aid will somehow be related to the results of this enquiry in the future in much the same way as was Marshall Plan Aid. It is only fair Io add that the Americans have given no encouragement to these views when speaking to ourselves or to the British. I mention them merely to indicate the uncertainty, not to say confusion, which may exist for some time as a result of this situation.

9. You will no doubt wish to consult with Washington and some other NATO capitals to determine in what way future NATO work in the economic field is likely to be affected by these decisions, and what steps should be taken by ourselves on the Executive Committee of OEEC when the time comes to make plans to implement them. We shall endeavour to obtain the views of the appropriate delegations in Paris and will report to you thereon later.

J.F. PARKINSON
Head of Mission