Foreign Relations of the United States, 1947, The British Commonwealth; Europe, Volume III

851.51/10–1747

The French Embassy to the Department of State

[Translation]

Washington, October 17, 1947.

Memorandum

The exchange of views which is taking place in Washington¹ permits the hope that it will be possible to release for the benefit of France the necessary resources in dollars:

(a) to meet the expenditures connected with all contracts concluded prior to September 1, 1947;

(b) to pay for current purchases of cereals, coal and fats, up to January 1, 1948.

However, the existing credits do not allow the French Government to authorize at present any new purchases of other essential products, such as raw materials for textiles, petroleum products, nitrate fertilizers, siderurgical products, etc.

Unless a remedy is quickly found for this situation, that is to say if imports of these essential raw materials were to cease completely, extremely serious effects would result therefrom for the French economy. Such effects would last for many months, whatever measures might subsequently be taken, the results of which would only be felt much later.

The table enclosed herewith,² the figures of which are amounts in round figures, shows the consequences of the stopping of those imports where new contracts could not be concluded before the end of the year.

This table is to be understood in the following manner:

—Column (1) indicates the monthly consumption on the basis of the first semester of 1947.

—Column (2) indicates the amount imported monthly from the dollar zone, on the basis of the first semester of 1947.

—Column (3) comprises the total reserve, that is to say the inventory on hand in France and the orders concluded but which have not yet reached their destination.

—Column (4) indicates the minimum requirements below which it is impossible to continue production in the branch being considered.

—The other columns show the development of available amounts in relation to the average consumption of the industries considered, in the first semester of 1947.

Thus, in fields as important as the petroleum, cotton and rubber industries (which latter industry is strictly dependent on imports of carbon black), the repercussions of the stopping of imports will have a catastrophic character as early as the month of November and of December 1947.

The result thereof, beginning with the month of November 1947, will be a lowering of the total of French industrial production which will reach 25 percent at the beginning of 1948, thus taking that production back to the level of the beginning of 1946. Such reduction would have the following principal consequences:

—Reduction of the continuance of work and large-scale unemployment not only in the industries engaged in the conversion of imported raw materials, but also in those industries utilizing semi-finished or finished products (for example, cotton spinning and weaving, working up of fabrics, etc.…)

—Necessity for a return to governmental allocations in branches freed from control,

—Appreciable diminution of agricultural production, resulting from the stoppage of imports of certain raw materials, such as nitrate fertilizers,

—General lowering of the standard of living, which would be particularly dangerous in view of the present social climate.

It might seem possible, with a view to maintaining production at the level of the first semester of 1947, to utilize for a certain time the margin between the present inventory and the minimum requirement.

As a matter of fact, this solution is impracticable. Industrialists would naturally tend to equalize their production and, for so long as they had no assurance of a resumption of imports, to make economical use of their inventories by reducing their activity. Furthermore, even before reduction of inventories to their minimum level, serious disturbances would be produced in the process of production.

The repercussions of the stopping of imports of equipment can only with difficulty be stated in detail: Certain articles of equipment would be found to be useless, due to lack of complementary matériel or spare parts. The result thereof might even be the complete shutting down of certain factories.

This is why it is indispensable that as soon as possible and, in any case, before the first days of December, the French Government should be able to be sure of having at its disposal, until the voting of more extensive credits as a result of the Marshall Plan, sufficient sums in dollars to cover not only its purchases of cereals, wheat and fats, but also the resumption of interrupted contracts for the importation of the principal raw materials.

As has been pointed out above, the sums which are indispensable to France amount in 1948 to a monthly figure of 120 million dollars.

H[enri] B[onnet]

1. Reference here is to the conversations which took place in Washington between United States officials and the CEEC delegation headed by Sir Oliver Franks, pp. 445–470.
2. Not printed.