The Cabinet Secretaries' Notebooks (CAB 195/7)

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Germany: Reparations

Germany: Reparations

E.B. 

Betwn. millstones – France and U.S.A.
Worst trouble, prohibited industries.
Advised U.S. to put two together and make clean sweep. Thought this wd. be agreed. Intended to meet Eur. Foreign Ministers with Douglas. But even if I got over Humphrey Cttee. ques. by this means, I wd. be in diffy. over war potential – even with U.K. Dpts.
Cd. wear U.S. proposals on Humphrey Cttee recommns save on Hamborn Steel plant.
U.S. plan that U.S/U.K. shd. run this for 3 yrs. (to produce Steel for Europ. re armament) cdn't be justified to U.K. public opinion. And most provocation to Russia. Output wd. have to go to Germany – cdn't defend it otherwise. This is quite clear to me.
Asked U.S. to consider Schuman's pol. diffies. If he goes fwd. on H. Rpt. alone and has to make concessions on that, he will have overwhelming criticism on security ground – His Govt. might fall.
Our public opinion isn't so difficult – tho' keen Dpt. feeling on m. potential.
On shipbldg. conflict betwn. Dpts w'in U.S.A.
Urged to agree by 12.2 because Congress hearings on E.R.P.
On Humphrey Cttee. ready to seek settlement betwn. Europe. and U.S. - makg. such U.K. concessns as I have to. But on security argument, am I to insist on simultaneous decision on restricted and prohibited indies.
If I don't U.S. won't give way at all on latter.
Want clear Cab. decn. F.O. interest isn't decisive.

A.V.A. 

Discussed with C.O.S. At short notice diff. to assess war potential effects of changes proposed in earlier decn. on H. Rpt. 45 plants are to be kept more than Cab. wished. No concession by U.S.A. – who stand by H. Rpt.
Diff. to assess addl. risk. Can M/S. say wthr. experts have considered the 45?
From security angle.

J.F. 

No chance to consider fr. that angle.
If any further concns made, we can give up hope of security check on G. industry beyond proposals in E.B.'s memo.

A.V.A. 

What of balance betwn. various plants. Will it be preserved?

E.B. 

Probably not.

H.W. 

Agree with memo. Give discretion. Overriding considn.: don't jeopardise Congress vote on E.R.P. Tho' this means disappointment to us in reparns – all O.E.E.C. countries will receive propte cut and we shall get v. little. R. will get 60% of what's left. Will U.S. put their quota into Eur. pool?
Restricted indies – diffies here, but support E.B. – subject only to looking at capacity for ball bearings, when they wd. get dangerous w. potential.

H. 

E.B.'s proposals minimum harm to security. Stress para. 6., wh. is important.
Warning, however, tht. abolition of resln on radius of shipping will give rise to concern. For will provoke early demand for liberty to build more tonnage. H'to agreed no bldg. of ocean going ships till 1951.
E.B. shd. insist on retaing. principles accepted Aug. '47.

B. 

General support of E.B.'s memo.
On radius, any concession given shd. be limited to Mediterranean, if possible. Wd. not then give rise to diffies. Have had to make concessions ad hoc to certain places in Med.

P.M. 

Will be criticised on basis tht. repns. are still going to Russia.

E.B. 

Tried to carry out agreemt because reciprocal deliveries wh. we needed to reduce dollar imports. But U.S. wdn't take these except delivered into Berlin. Agreed y'day to tell U.S. we wd. take oustandg. deliveries at Hamburg. 600.000 t. of Krupp's machinery (tail end of it) I will send to R. To compensate I.A.R.A. countries do no more allocn. to R. and let I.A.R.A. have it. Wd. end repns quickly.

A.B. 

Three ques. a) repns both must continue or stop simultaneously –   both to W. and E.
                    b) am opposed to reducg. G.'s industrial capacity for   sake of reducg. her war potential.  Esp. as we are    pursuing expansionist policy over whole world – and   for that G. steel wd. be of greatest value.  Nec. to our   policy of checking Comm. throughout world.
                    c) Expansion of our steel output and restn of G's. is indefensible.
                    d) Can't achieve security by holdg. down ind-capacity. Must do it by inspn. of finishing ends.
                    e) Can't accept any arguments based on competn. with   our industry – eg. shipbldg.
E.B. oughtn't to be requd to argue with U.S. on grounds repugnant to Labour principles.

N.B. 

Sympathy with A.B.'s view.
But on Hamborn, U.S. view doesn't stand up. Cd. not operate now w'out depriving others of raw materials. Cdn't be destroyed after 3 years.
Can't defend using it for steel for Eur. re-armament.
Must get agreement with U.S.

H.D. 

Much concerned.
Reject N.B.'s view tht. G. cdn't fight for 20 yrs. Hitler re-armed G. in 6 yrs.
We shd. have no illusions tht. G. is still the biggest menace to us and our children.
Don't oppose memo – tho' reluctant to refrain from opposing it.
Assume we will stand firm on 5 plants.  I wd. risk Congress vote for sake of these 5 – they are overwhelmingly important.

E.B. 

Have always bn. willing to risk E.R.P. – did so over Preferences. That shdn't determine our policy.

H.D. 

Havg. gone all this way to meet U.S., if E.B. can't argue U.S. out of anything save 5 plants, I doubt if we shall jeopardise E.R.P. vote on that posn. U.S. opinion cd. be made to understand our special posn.
Hamborn. U.S. plan must be rejected.
Figures. U.K. popn. over 50 m. – steel 15 m. and over.
              W. Germany      46 m  -    "     11.1 m.
No case for claiming they shd. have larger output. If Hamborn were retained they cd. go up to 13. m. – outrageous.
On Hamborn, risk E.R.P. vote by all means.
Thus, give E.B. wide discretion on basis tht. he will make no concession below his minima and in hope tht. with Fr. aid he will do better.
Some U.S. soldiers want to use G. prodn. and man power in war. But wdn't other U.S. soldiers agree with me?
Repns to R. will be awkward. Also: are we still paying for G. food out of Exchequer? We shdn't now G. exports are reviving and competing "unfairly" with B. industry. Diff. electoral posn. for us.

P.M. 

Are H. Cttee all altruists? What is U.S. interest? Any financial interests?

E.B. 

Ever since G. was "zoned", have always believed U.S. wd. seek to make it Pittsburg on low wages. That has bn. defeated by our policies, eg. over Ruhr.
Can't answer P.M.'s ques.
My diffy. W.O. administer: State Dpt. policy: H. Cttee concerned for E.C.A.

H.M. 

Support memo.
Mustn't allow R. deliveries to continue if we abandon our claims.

H.W. 

Competn with B. industry. [General agreemt. on that.
We shd. never determine policy on basis of preventg. fair competition. Wd. welcome Cab. decn of principle on that.
"Unfair competn due mainly to price fixing: valuation of mark : wages of Germans too low because food subsidies now reduced.

D.J. 

New Fusion Agreemt. now being negotiated.  M'while we are makg. some contn. to cost of G. food.

E.B. 

But U.S. are takg. lions share.  We have done pretty well out of Fusion. Extended original Agreemt. – to avoid discn in U.S. election – for 3 months to April.
Wdn't object to another 3 months' extension – to tide over Congress hearings on E.R.P.

A.B. 

Wd. R. really get 60% of all reparations? What are the figures?

P.M. 

Thought E.B. was intendg. to close down on R.

E.B. 

Yes : adopt a diff. form of allocn by wh. we cd. compensate ourselves for what we give up by this decision.
Delivery of free 10% has bn. suspended. Delivery of 15% against reciprocal supplies has bn. contd. For our interests eg. German potash is essential to our agriculture (60% of our supplies come from Silesia). 
Memo approved.

A.B.  

Even to endangering E.R.P.?

H.D. 

Para. 2. of memo. states it clearly enough. Paras (b) and (c) state a final line.

G.T. 

Inspn at finishing end. (A.B.'s point). Argued for 5 years: I'm still convinced tht. A.B. is right. Cd. this be examined?

A.B. 

Are Allies workg. out system of inspn.

E.B. 

Yes – in discn of Occupation Statute.
I hold A.B.'s view; but have never bn. able to persuade French.

Taken from C.M. 10(49) - Meeting held on 8 February 1949.