CAB129-37 — Page 17

T

[]

In

IL

0

W

Page 17

}

י

Page 17

ן,

19

01

|| 1.

I.

I

Page 17

ງ.

川

if

1

།"

2

10

40

A recent development has been the promotion of a scheme for cloPage 980097union between France, IPage 180df B097lux. We discuss this scheme in paragraph 11 below.

5.

Mr. Hoffman and his principal advisers are convinced : that Congress will be unwilling to vote a further

appropriation for Marshall Aid unless effective progress towards 'unification' can be demonstrated to Congress before consideration of the 1950-51 appropriation begins next March.

6.

There is no item on the formal agenda of the forthcoming Paris meetings which brings up the issue of 'unification'. But Mr. Hoffman is himself attending the meeting; and we must have our answer ready if, as is probable, we are asked to declare our attitude on this issue and on the nature of any further contribution which the United Kingdom is prepared to make

Policy on 'economic unification'

7.

His Majesty's Government's policy towards European economic co-operation was set out in E.P.C.(49) 6 or 25th January, 1949, which was approved by the Economic Policy Committee on 26th January (E.P.C.(49) 5th Meeting, Minute 2). In brief the policy there set out was one under which His Majesty's Government were not to involve themselves in the economic affairs of Europe beyond the point from which they could, if they wished, withdraw. This policy has never been publicly set out, or conveyed in any form either to the Americans or to the participating countries.

8.

The risks which we ought not to run in co-operating with Europe were not explicitly set out in E.P.C.(49) ~ 6, but in present circumstances we consider that we should not accept measures or proposals which would have any of the following effects, directly or by implication:·

(1) Loss of His Majesty's Government's responsibility

for budgetary and credit policy, and for the management of the reserves;

(ii)

(iii)

(iv)

hindrance to our own efforts to reach and maintain

equilibrium between the dollar area and the sterling area; we cannot sacrifice opportunities for dollar-earning (or dollar-saving) in order to make it easier for other European countries to earn or save dollars;

opening to European decision the size of strategic

dollar-earning and dollar-saving United Kingdom industries;

materially affecting the system of Imperial

preference.

Within these limits, we have since last January gone as far as we could in the direction of European co-operation. The most important step is our proposals for the liberalisation of trade. We have also made a substantial contribution to the Intra-European Payments Scheme.

9.

But the changes which have taken place in the economic position of Europe and of this country since January make economic union with Europe less rather than more attractive than it was then. At that time, our policy was based on the assumption