If a committee is clearly determined to recommend allowances for Soviet requirements, the United States representative should refuse to concur in that part of any formal allocation (or equivalent) involving such requirements. Summary While avoiding, if possible, debate on the direct issue of shipments to the Soviet bloc, United States representatives will oppose recommendations that would have the effect of releasing scarce commodities to the bloc except where the two-way trade involved has a clear advantage for free world strength. Where a committee is determined to recommend allowances for Soviet requirements in formal allocations (or equivalent), United States representatives should refuse to concur in that part of the recommendations relating to the Soviet bloc. If the effectiveness of a committee's work is seriously jeopardized by opposition to the United States stand, the United States representative will consult with the United States member of the central group before proceeding further. V. USE OF PARALLEL DOMESTIC CONTROLS One of the devices for possible international action will be the adoption of agreed principles for the reduction or elimination of nonessential use of the commodity. Should the United States representative attempt to obtain controls elsewhere paralleling our own? Discussion If a complete allocation system is devised, each country will have an incentive to use a commodity in a manner which is most beneficial to its own economy. Therefore, pressure for the adoption of conservation controls would be less urgent than in cases where a full allocation system is unlikely to be achieved soon. Where early allocation does not seem likely, the United States representative should make a special effort to obtain recommendations from the committee which would result in the reduction of nonessential consumption among the participating nations. It is apparent, however, that differences in the industrial practices and general economic pattern from country to country will generally preclude controls exactly parallel to those of the United States.' (The United States, moreover, might find it difficult if not impossible to duplicate the consumption pattern of most other countries if these countries were to formalize by regulation levels of consumption already more austere than that of the United States.) Whether allocations are used or not, United States representatives should promote conservation by free-world nations both by governmental measures and the stimulation of private efforts, with intergovernmental exchange of technical information to facilitate both. Summary United States representatives should encourage conservation efforts, both governmental and private, and the exchange of technical information and assistance to facilitate both. Where it appears that allocation is going to be impracticable or long delayed, the United States representative should place increased emphasis on the adoption of agreed principles governing domestic controls in individual countries for the reduction of nonessential consumption, but should not ordinarily insist on regulations identical to those in the United States. VI. ATTITUDE TOWARD QUID PRO QUO PROPOSALS One of the most difficult problems for United States representatives, both inside and outside committee meetings, will be the attempt by producing countries to obtain United States guaranties (or those of other industrialized nations) in exchange for their cooperation. Discussion It is already evident that some producing countries will want to "horsetrade" particular commodities against specific assurances from the United 1 Parallel measures will be important in the case of specific products where United States domestic controls may place United States firms at an unfair disadvantage in the United States with foreign competitors. This will be controlled by United Sates import measures, however, and will probably not come up for discussion in the committees. (See FSRC, doc. 3.) States, particularly assurances as to export licenses and priorities. Explicit guidance in this situation is difficult because of the wide variety of circumstances which may surround any specific demand. In considering quid pro quo proposals, a distinction should be made between: 1. Proposals to trade quotas on specific quantities of one commodity against specific quantities of another. 2. Other quid pro quo proposals. The starting point in replying to quota-for-quota suggestions will be the basic attitude of the United States favoring the widest degree of fair sharing, or give and take, among the nations of the free world. The relative needs of all countries, including the United States of America, must be appraised with equal fairness both in cases where American exports are sought and in cases where American needs are to be met. Generally, encouragement should not be given to the first type of proposal. This kind of bargaining would prejudice our basic concept that scarce materials must be distributed on the basis of demonstrated needs and on the basis of equality of sacrifice in the case of less essential requirements. To conclude a bargain of this kind would set off a chain reaction of bilateral barter deals that could only result in unfair quantities going to countries who happen to have bargaining power, an inefficient distribution of scarce materials available to the rest of the free world and the development of disruptive friction among the countries opposing Soviet aggression. If insistence on this point threatens to jeopardize major United States objectives in a committee, the United States representative will, of course, seek further instructions from the United States member of the central group. Our attitude toward other quid pro quo proposals must depend on circumstances. Such demands may be in multiple or general terms. They may range over such topics as price agreements, protection from inflation in the United States, long-term contracts, financial guaranties, and facilitating authorized United States exports. It is difficult at this stage to appraise how much such assurances will require consideration in the committees and how much can be left for consideration for bilateral negotiations along the usual lines and outside the IMC framework. As a cardinal principle the United States representatives must avoid promises on which they may not be able to deliver. Although it is understood that no representative will be called upon to commit his government, anything approaching a promise is likely to be held in the future as a commitment. Long-term promises, particularly, may prove dangerous and result both in a serious accumulation of liabilities and an exhaustion of future freedom of action and bargaining margin. Ordinarily negotiations of bargaining character can best be conducted on a bilateral basis and not in session with a number of nations. In each case, it should be emphasized that the United States representative must have the concurrence of the United States agency or agencies with chief responsibility (e. g., procurement, financial assistance, etc.) or in many cases depend on them for the concrete negotiations. While the formation in the IMC of individual autonomous commodity groups complicates the problem of negotiating in one commodity group to secure cooperation in another, it by no means precludes it. It is here that teamwork "across the board" of United States representatives to the various committees is indispensable. The regular or special meetings of the representatives with the United States member of the central group provide an established means for such joint consultation. In addition, the following should be noted: 1. The United States is willing to bargain its general cooperation with other nations in return for their general cooperation. 2. Under the allocations priorities guidance discussed earlier, the United States can pledge positive support for those United States exports directly related to the production of strategic and critical materials for the use of the free world. 3. In the case of seriously noncooperative nations, the priorities discussed would automatically apply to lower the export of scarce materials to those nations, except where political or military objectives dictate otherwise. 4. Some priority and other assistance in selected cases for commodities not under allocation or quota is feasible without setting off a chain reaction. Requests for assistance on particular orders likewise can be passed on to the appropriate authorities for consideration. Summary United States representatives must avoid what are, or might be construed to be, promises on which they may not be able to "deliver." Ordinarily bargaining of any quid pro quo nature is best suited to bilateral negotiations within, of course, the spirit and limitations of multilateral agreement. "Across-the-board" bargaining will principally be reviewed by the United States member of the central group in conference with the United States representatives on the commodity committees. The United States will not bargain on the distribution of export quotas. The allocation of supplies to the free world must be founded on demonstrated requirements and relative contribution to the strength of the free world. This principle should not be compromised by giving one cooperating nation a preferred position over other cooperating nations merely because of its greater bargaining acumen or power. The United States will bargain general cooperation for general cooperation. It will press priorities and allocations for projects directly related to defense production. Seriously noncooperative nations will be penalized in the battle for priorities and allocations. VII. MILITARY AND STOCKPILE REQUIREMENTS DATA As most of the committees begin to examine the immediate and prospective comodity situations, the question will arise as to the extent to which the United States representative should give data on United States military and stockpile requirements. It is recognized that close security control of any information given these committees is not feasible, both because of the large number of nations involved and the "neutral" position of a few. It is likewise true that any leakage of such information to producers might in some cases have an adverse effect upon the terms of future procurement. On the other hand, if the United States expects to participate in a critical review of other nations' requirements, it can hardly restrict the figures it furnishes to civilian requirements or an overall lump sum. In fact, if the United States is unwilling to discuss even its immediate procurement plans to some extent, the international conferences would appear to be doomed to at best very partial benefits or, more probably failure. On most items, foreign intelligence sources can figure with fair accuracy our military requirements, given a publicized manning schedule and the objectives of procurement plans for some major items. In general, this Nation has rather openly revealed to the world the broad outlines of its immediate rearming plan. Moreover, inadvertent disclosures and relatively complete trade figures have already revealed the general proportions of stockpile procurement. Finally, it is an open question whether a disclosure of immediate procurement objectives would be any more harmful to prices and other procurement negotiations than the current combination of some figures and some rumors. Accordingly, as a general rule, the following should guide United States representatives. (Where unusual circumstances prevail for an individual commodity or where other major considerations arise, United States representatives should check back with the United States member of the central group for further instructions.) 1. United States representatives should not disclose either the current stockpile status or ultimate stockpile objectives. 2. Information on military requirements and stockpile programs for the immediate period ahead (not more than 1 year in advance) should be provided only if, when and to the extent necessary to further United States objectives in the conferences. Only general justification should be offered, bearing in mind item No. 1 above and the need to avoid any disclosures on rearmament and manning plans that have not been made public. 3. United States representatives thus are generally authorized to submit figures as required on United States civilian requirements, lump sum figures as required on military requirements for a period not exceeding 1 year ahead, and lump sum figures on the stockpiling program for a period not exceeding 1 year ahead. Such information should be so phrased as not to constitute a commitment to buy any specific amounts. It may be expressed either in terms of the minimum requirements it is felt must be met-or a range extending from these figures to amounts of what we would like to buy if satisfactory arrangements can be made. 4. In the preparation of such figures the United States representatives will, of course, work closely with the interagency advisory groups and, particularly, Munitions Board members as regards security aspects. Senator MALONE. This is a letter to Secretary Marshall from James E. Webb, Acting Secretary. Acting Secretary of State? Mr. EVANS. Yes. Senator MALONE. March 2, 1951. The attachment was revised by the international trade policy and economic resources group in the State Department on the Truman-Pleven talks of January 29 and 30, 1951. It shows the United States position. They advise the guaranty of maximum price and minimum price. DEVELOPMENT OF ATLANTIC COOPERATION WITH A VIEW TO COMBATING MORE EFFECTIVELY RISING PRICES AND INFLATION United States position: We believe the most effective international action that can now be taken is to work out agreements for international allocation of raw materials in short supply and for coordination of domestic programs for reducing unessential consumption. Such agreements might also include the guaranty by producing countries of maximum prices, in exchange for similar guaranties of minimum prices. These arrangements would be worked out through the commodity committees described in paper 5/2. The United States has no present plans for dealing internationally with rising commodity prices except what may be accomplished through these commodity committees. This was the International Materials Conference operating? Mr. EVANS. Yes. This referred to the International Materials Conference before it was actually formed. Senator MALONE. Then we will simply submit this as an exhibit. (Document No. 7 is filed with the subcommittee, but is not to be included in the record.) Senator MALONE. These are three documents, 34, 51, and 51-A. They describe the allocation of copper and indicate that the United States was getting about the same amount of copper as it received before, and goes into some detail. We will make each of these papers mentioned, Nos. 34, 51, and 51-A, each an exhibit and they are to be placed in the record at this point. (The matter referred to is as follows:) MARCH 1, 1952. FISCAL YEAR 1953 MUTUAL SECURITY PRESENTATION INTERNATIONAL ARRANGEMENTS FOR THE ALLOCATION OF SCARCE MATERIALS The attached paper prepared by State, MSA, and DPA, is a briefing paper for the use of agency witnesses at the House and Senate committee hearings in connection with the 1953 program. The subject of this paper covers item 7 of the assignment list circulated in the annexes to MS D-105. CHARLES T. LLOYD, Secretary. INTERNATIONAL ARRANGEMENTS FOR THE ALLOCATION OF SCARCE MATERIALS NEED FOR INTERNATIONAL ALLOCATIONS International allocation of scarce materials emerged as a primary need in the months following the Korean invasion. Without it, there was something approaching chaos in world markets. Prices shot up, as buyers tried to outbid one another, and supplies too often moved to speculators and manufacturers of nonessential products, leaving producers of essential goods unable to cover their raw material requirements. It was clear that such a maldistribution of supplies would make it physically impossible to carry out the common defense program while maintaining a healthy civilian economy. Also, rising prices, if allowed to go unchecked, would immeasurably add to the cost of the common defense program and diminish the contribution which we and others could make to it. ORGANIZATION OF THE INTERNATIONAL MATERIALS CONFERENCE The possibilities of using an existing intergovernmental organization, such as NATO or OEEC, for the emergency allocation of scarce materials were investigated by interested governments. It was quickly apparent, however, that the geographic coverage of these groups was too limited, considering the worldwide pattern of trade of many scarce materials, and that an ad hoc organization in which all free nations could participate was required. Early in 1951, the United States, United Kingdom and France jointly invited other governments to participate in formation of the International Materials Conference which would consist of a central group and a number of autonomous commodity committees. The latter would "consider and recommend to governments the specific action that should be taken, in the case of each commodity, in order to expand production, increase availabilities, conserve supplies, and assure most effective distribution and utilization of supplies among consuming countries." While it was not the intention that all international action on raw materials shortages would have to be handled within this organization' the plans for IMC structure were drawn along flexible lines so that the organization might deal with any raw materials, other than food and petroleum, in which shortage problems developed. COMMODITY COMMITTEES Seven commodity committees were established, covering: copper, lead, zinc; sulfur; cotton and cotton linters; tungsten and molybdenum; manganese, nickel and cobalt; wool; and pulp and paper. These were the commodities that appeared to require immediate attention. Additional committees can be formed, as needed, upon initiative of the central group. For efficiency in operation, the membership of each committee has been limited to those countries of the free world which are important producers and consumers of the commodities concerned. The membership, ranging for individual committees from 11 to 16 countries, represents from 80 to 90 percent of the producing and consuming interests of the free world. Twenty-eight countries are represented on one or more committees. By virtue of their importance as industrial nations, the United States, United Kingdom and France and Germany have qualified for membership on all committees. Details on membership are given in annex A. Nonmember countries participate indirectly in the work of the committees. They are asked to file questionnaires on their supplies and requirements and, if they wish, may appear before the committees to explain their needs. Recommended allocations make provision for nonmember requirements. The individual committees began their work during the period from February 26 to April 30, 1951. Initially, their attention had to be concentrated upon organizational matters and upon the assembling of basic data on supplies and requirements. By the third quarter, however, two committees had completed their evaluation of the supply-demand position and reached agreement on quarterly allocations of three commodities-sulfur, tungsten, and molybdenum. In subsequent quarters, recommendations for allocations of these same commodities and copper, zinc, nickel and cobalt have been made. In addition, there have been recommendations for four emergency allocations of newsprint. Further allocations of these 8 commodities are being negotiated. The review of the supply position of most other commodities under the IMC has shown supply and demand in approximate balance, or nearly enough so as to remove the need for allocations. In only one case, wool, has there been any lack of agreement among the committee members as to whether some international agreement on distribution was needed. The committees have also paid attention to the possibilities of increasing production and conserving supplies and have recommended measures to governments on these matters in a number of cases. Outstanding in this respect has been the work of the Sulfur Committee and of a Joint Subcommittee on Utiliza 1 Tin and rubber, for instance, were being dealt with by other international groups and were, therefore, not brought under IMC. Coal, which is a European problem chiefly, has been allocated by the joint efforts of the OEEC and ECE Coal Committees. |