Printed for the Cabinet. March 1951
Page 112
SECRET
C.P. (51) 89
19th March, 1951
Copy No.31
CABINET
CONTROL OF GERMAN INDUSTRY
MEMORANDUM BY THE SECRETARY OF STATE FOR FOREIGN AFFAIRS
I circulate herewith, for the information of my colleagues, a report upon the recommendation, submitted to the Governments of the United Kingdom, France and the United States of America by the Inter-Governmental Study Group on Ger- many, * that the Prohibited and Limited Industries Agreement of 1949 should be replaced by an Agreement concerning Industrial Controls. I propose to approve the recommendation on behalf of His Majesty's Government; and to authorise the United Kingdom Commissioner in Germany to sign it and bring it into force at an early date.
2. The contents of the new Agreement, and of certain agreed instructions upon the administration of its provisions, are analysed in Section II of the Report. The restrictions imposed by the Prohibited and Limited Industries Agreement have been modified to a lesser degree than the United Kingdom Delegation had been instructed to try to secure; and the outcome of the negotiations represents a marked concession by the United Kingdom and United States Governments to the French point of view. Nevertheless, I consider that it was realistic and timely to enter into the compromise embodied in the recommendation of the Study Group. It had been abundantly demonstrated in the course of discussions stretching over six months, that the French Government could not be induced to accept a more liberal revision of existing controls. Although, too, German public opinion is unlikely to greet the outcome with enthusiasm, it was clearly wiser to agree that several helpful relaxa- tions should be put into force at once, rather than to risk a justifiably strong reaction in Federal Germany by continuing to pursue a more comprehensive but more elusive settlement.
3. In Article I of the Agreement the signatory Governments have bound them- selves to review its provisions before the end of 1951. This agreed procedure should enable controls in the industrial field to be harmonised with developments in general Allied policy towards the Federal Republic during that period. It should also serve to reconcile those elements which might otherwise make capital out of the degree of discord between the Occupying Powers which could be read into the new Agree- ment; and to encourage those elements which are genuinely working in the common cause of integrating Federal Germany into the Western system.
4. As recorded in paragraph 17 of the report, it is probable that the United States Government will, after accepting the recommendations of the Group and signing the Agreement, express to the United Kingdom and French Governments, through the diplomatic channel, their views on the timing of further revision of industrial controls in Germany. The recipients would be under no obligation to answer such a communication; and the desirability of doing so would have to be assessed in the light of its contents. But if the American note raises controversial issues, I will consult my colleagues before replying. And, naturally, I should seek their views upon the instructions to be given to the United Kingdom Delegation before any negotiations upon a revision of the Agreement were begun.
Foreign Office, S.W. 1,
19th March, 1951.
H. M.
The Group was set fup by the Foreign Ministers of the Occupying Powers at theiz meeting in London in May and has been instructed to report on various German questions.
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