771A.00/2–1452

Memorandum of Conversation, by Joseph M. Sweeney, Office of the Assistant Legal Adviser for European Affairs

Subject:

  • ICJ Case, Economic Issue.

Participants:

  • Meeting at Department of Commerce with Mr. Blackenheimer (Chief of African Division), Mr. Saul (French dependent territories), Mr. Kean and Mr. Sarich(French Division).
  • Mr. Sweeney

In furtherance of previous phone conversations, Mr. Blackenheimer invited me over to check some material assembled by his office, and to explore more fully for him some of the lines of arguments in which we might be interested. He invited the French division to participate in the meeting.

The meeting revealed the existence in Commerce of a split comparable to that existing in State between the French and the North African divisions. The French desk believes that France is justified, on economic grounds, in enforcing exchange controls in Morocco and that Morocco cannot be separated from France for financial purposes. It is a part of the Franc area and to relax or eliminate exchange control these would simply create a leakage in dollars which would affect the whole financial stability of France.

The North African division questions this on the ground that it is a pure assumption and that no proof has been advanced in support of it:

(a)
It might not create such a leakage as is feared;
(b)
free list now in existence proves it can be done; does not endanger economy;
(c)
other remedies or alternatives have not been examined or applied;
(d)
French theory that control of import without allocation of currency is necessary is admission that exchange control is not effectively administered; black market;
(e)
Actually situation exists only because France [Morocco?] has been made part of French financial picture; argument that Morocco has too much of a trade deficit with U.S. to stand on its feet is exaggerated and figures supporting it are inaccurate; figures for export do not include Moroccan products imported to France and then re-exported to U.S.; thus dollar earnings of France [Morocco?], actually credited to France should be credited to Morocco;
(f)
In fact same situation exists in certain African areas controlled by Great Britain; British have also argued the necessity of controlling imports without allocation of exchange when American firms imported material to expand their own operations, and not for sale; British finally fell back on argument that this gave Americans an unjust competive advantage.

I suggested that the main purpose of our argument was to undermine the French position that it can legally disregard previous treaty rights because it is physically, forced, under an absolute necessity, to control exchange and imports (in effect relies sir standibus argument). The French should be made to carry the burden of proof of their argument instead of being able to assert it without challenge on our side. While it appears practically impossible at this time to argue that there was no necessity at all for imposing controls, we can question whether they have to carry it so far as to override all their treaty obligations and whether they are not doing in effect more than is reasonably necessary to obtain their legitimate objectives. To this end we could argue:

(a)
There were alternatives to exchange control.
(b)
If the French say there were none because this was the most desirable method available, then we question this position by pointing out that it is not shown a leakage in Morocco would weaken the whole French structure, that the controls are badly and inefficiently administered, and that Morocco need not necessarily be included in a franc area.

Mr. Kean stated he did not think his division would object to this line of argument but said that the French would probably come back with arguments along the line he had mentioned i.e., that Morocco could not be separated from the franc area.