Foreign Relations of the United States, 1951, European Security and the German Question, Volume III, Part 2

762A.0221/4–1951

Paper Approved by the Intergovernmental Study Group on Germany¹

secret

[London,] 14 March 1951.

IGG/P(51)56 Final

A. Prohibited Items

In determining the exceptions which may be authorized to the prohibitions set down in Article II in respect of the items listed in Annex A to the Agreement, the High Commission should be guided by the following considerations:—

1. The Foreign Ministers in Brussels approved recommendations of the Military Committee of the North Atlantic Treaty Organisation to the effect that the manufacture of certain items shall not be permitted in Germany. Unless and until the Governments concerned decide otherwise, the High Commission shall not authorise the manufacture of any of these items nor of any specialised productive, testing or training equipment associated with the Development, production or use of these items. Materials, products, facilities and equipment relating to atomic energy shall continue to be subject to Allied High Commission legislation.

2. The High Commission may henceforward grant authorisations against bona fide orders from NATO countries, from the Occupying Forces or, with the approval of the three governments, from other countries, for the production or manufacture of items or component parts to which in the opinion of the Military Security Board there is no security objection, and which are amongst those in the following Groups of Annex A:

(a) Group I(d)

(b) Unarmed and unarmoured vehicles in Group II(a)

(c) Group III

(d) Group V (b)

(e) Group VII (a) and (b)

to the extent that these items can be produced without equipment specially designed for the manufacture of military items.

3. Unless agreement is reached on some other procedure, any bona fide orders from North Atlantic Treaty countries or other countries for items listed in Annex A, not subject to the provisions of paragraphs 1 and 2 above, shall be promptly referred to the three Governments for appropriate ad hoc decision as to whether the items in question may be produced in Germany. As soon as a German contribution to defence is agreed these arrangements shall be reviewed. Present practice with regard to the manufacture of prohibited items for approved domestic needs and export is not affected by these instructions.

4. White phospherous has been retained in Group VIII of Annex A on the understanding that the construction of capacity may be licensed and production permitted for legitimate peace-time purposes under existing High Commission legislation. The High Commission should ensure that applications to erect capacity which is not unreasonably out of proportion to estimated requirements are favourably considered and promptly dealt with.

B. Electronic Valves

The administration of Article IV of the Agreement shall be governed by the following:—

1. The list of permitted types of valves shall be revised by the High Commission as rapidly as possible and shall be kept current by addenda as required. A valve shall be considered eligible for inclusion in this list:—

(a) if it has a rated anode dissipation of 50 watts or less, determined according to any recognised standard or method acceptable to the High Commission; and,

(b) if at frequencies of 250 megacycles or higher; under commercial operational conditions, it does not have an output/input power ratio greater than 50 percent of its maximum rated output/input power ratio at ordinary frequencies.

2. Applications for licence to manufacture valves not included in either the permitted or the prohibited list shall be considered on their merits, due consideration being given to the peacetime uses for the valve as presented by the application. Licences will normally be granted against such applications unless there is reason to believe that the valves are to be used to fulfil an unauthorized military requirement.

3. As the provisions of Article IV of the Agreement involve a departure from the present methods of control of electronic valves, the High Commission should direct that a review of the provisions of this Article be undertaken within three months from the date when this Agreement becomes operative in Germany.

C. Control of Capacity

In maintaining control over capacity under Article V of the Agreement the High Commission shall be guided by the following instructions:—

1. General instructions

(a) The industrial capacities over which control is maintained in this Agreement shall not be increased except as may be agreed among Governments or as provided below.

(b) The three Governments desire that the application of paragraph (a) above should not hamper technological progress or the modernisation of production, and should permit wherever possible the reduction of costs and the decreased consumption of raw materials, power and fuel. To this end the High Commission should, in the absence of weighty security considerations to the contrary, permit the substitution of new or more efficient equipment, the rearrangement of machinery, the introduction of new processes and other technical changes even though, taking account of the disposal of capacity replaced they may involve a minor increase in the capacity of the factory or equipment in question.

(c) In applying the provisions of paragraph (a) above capacity shall be calculated in each case on the basis of the capacity the retention of which in Germany the Occupying Powers do not disapprove, to the exclusion of equipment available for reparations in accordance with the agreements entered into by the three Governments.

2. Instructions on individual industries

(a) Steel

The plant and equipment over which control is to be maintained in accordance with paragraph 1 (a) above shall be:—

(i) Blast furnaces.

(ii) Converters and furnaces for the production of crude steel.

(iii) Equipment for the production of ferro alloys.

(iv) Equipment for the manufacture of seamless tubes of a size greater than 90 millimetres diameter.

(v) Plate mills over three metres wide and all rolling mills capable of rolling, on a two shift basis, more than 400,000 tons per annum.

(vi) Forging presses over 2,000 metric tons.

Henceforward the plants and equipment removed from the reparations list under the terms of paragraph VII(b) of the Petersberg Protocol of Agreements dated 22nd November, 1949, shall only be subject to the same controls as are applicable to other steel plants in Germany.

(b) Electric arc and high frequency furnace steel

The High Commission should study, as a matter of urgency, the limitation on electric arc and high frequency furnace steel capacity and should report to governments whether any changes should be made in the light of the needs of Western defence.

(c) Shipbuilding

(i) The equipment and facilities over which control is to be maintained in accordance with paragraph 1 (a) above shall be:—

• aa) Launching slipways.
• bb) Quays and wharfs.
• cc) Shipyard workshops, including essential equipment.
• dd) Floating docks, floating dock pontoons and graving docks.
• ee) Ship repairing slipways.

(ii) The prefabrication of hull sub-assemblies of vessels shall continue to be prohibited except in the shipyard in which such vessels are to be built or except pursuant to license issued by the Military Security Board. This provision shall not preclude the procurement from any source other than the shipyard in which the ship is to be built of stern frames, rudder posts and other equipment which may normally be obtained from any such source.

(iii) In defining the essential equipment of shipyard workshops referred to in (i)(cc) above, the Military Security Board should be instructed to draw up as short a list as possible covering only those items of equipment which, if installed, would be capable of leading to a substantial increase in the output of the workshop.

(iv) The A. G. Weser (Deschimag) Shipyard, Bremen, henceforward will be permitted to construct ships and will only be subject to the same restrictions as are applicable to other shipyards in Germany.

(d) Synthetic rubber

The High Commission may authorise the rehabilitation of plants, including the installation of new equipment, and the utilisation of new processes. However, as long as solid fuels are in short supply the High Commission may grant licences only to the extent that the additional consumption of coal and coke necessary for the production contemplated does not affect the satisfaction of the needs of the solid fuel importing countries.

(e) Synthetic petrol, oil and lubricants, produced directly or indirectly from coal or brown coal

As regards synthetic oil, additions to capacity of equipment primarily designed for manufacture of synthetic oil and the use of existing capacity shall be subject to licence. As long as solid fuels are in short supply the High Commission may grant licences only to the extent that the additional consumption of coal and coke necessary for the production contemplated does not affect the satisfaction of the needs of the solid fuel importing countries. However, the three Governments interpose no objection to the granting of the applications outstanding for the use of the Bergkamen, Viktor, Scholven and Ruhroel plants as soon as this Agreement is concluded.

D. Shipping

1. The High Commission may henceforward authorise the inclusion in merchant ships ordered by NATO countries, or, with the approval of the three Governments, by other countries, of defensive features, and necessary space and facilities therefore, which are otherwise prohibited under Article VII of the Agreement. These shall include but not be limited to the following:—

(i) Stiffening in readiness for the mounting of defensive armament.

(ii) Measures to reduce the vulnerability of the ship to underwater damage which would normally be experienced only in wartime (e.g. by the upward extension of bulkheads in the shelter deck type of ship).

(iii) Measures to protect key positions against damage which would normally be experienced only in wartime (e.g. protection of the bridge).

(iv) Provision for adequate clear space in the super-structure of the ship to allow for the operation of the armament.

(v) Auxiliary electrical generating machinery and equipment of capacity in excess of that normal to the type of ship.

(vi) Degaussing cable (M. coils).

E. Machine Tools

1. The prohibition on the manufacture except under licence of the machine tools listed in Annex B to the Agreement concerning Prohibited and Limited Industries of April, 1949, is not maintained in the present Agreement, but the High Commission’s attention is drawn to the significance of these machines as war potential. A system of declaration of manufacture by the producer, in which the intended destination will be given, and of periodical reports on the quantities of such machines in Germany shall be set up, or if already in existence, maintained.

2. For this purpose, a list is attached showing the tools on which reports should be required.²

3. The attention of the High Commission is drawn to the desirability of continuing to use the services of the Military Security Board in connection with the effective control of the export of such machine tools to countries in the East.

4. As the new Agreement does not refer to machine tools, it is suggested that the High Commission may wish to make a public announcement concerning the reporting requirements.

1. The source text was the third enclosure to the circular airgram referred to in footnote 1, p. 1395. Apparently these instructions were drafted by the steering committer on March 14 and approved by the plenary on March 16.
2. Not printed.