*From the Marshall Plan* *to the Treaty of Rome:* United States Foreign Policy and European Integration Richard P. Klau, '93 Senior Honors Thesis Dirk C. van Raemdonck, Advisor Lafayette College Department of International Affairs Defended on April 29, 1993 TABLE OF CONTENTS *Introduction* . . . . . . . . . . . . . . . . . . . . . . . . ii *Chapter 1* . . . . . . . . . . . . . . . . . . . . . . . . . . 1 The Post-War Period . . . . . . . . . . . . . . . . . . 1 Attitudes in Europe . . . . . . . . . . . . . . . . . . 5 The Marshall Plan . . . . . . . . . . . . . . . . . . . 8 *Chapter 2* . . . . . . . . . . . . . . . . . . . . . . . . . . 10 The Marshall Plan . . . . . . . . . . . . . . . . . . . 10 Washington's Turn . . . . . . . . . . . . . . . . . . . 17 The Organization for European Economic Cooperation . . . 19 *Chapter 3* . . . . . . . . . . . . . . . . . . . . . . . . . . 22 The European Coal and Steel Community . . . . . . . . . 22 Euratom . . . . . . . . . . . . . . . . . . . . . . . . 29 *Chapter 4* . . . . . . . . . . . . . . . . . . . . . . . . . . 33 The European Defense Community . . . . . . . . . . . . . 33 NATO . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Activity in Europe . . . . . . . . . . . . . . . . . . . 36 Monnet vs. de Gaulle . . . . . . . . . . . . . . . . . . 39 Back to Basics . . . . . . . . . . . . . . . . . . . . . 41 Impact of EDC Failure . . . . . . . . . . . . . . . . . 44 *Chapter 5* . . . . . . . . . . . . . . . . . . . . . . . . . . 46 The European Economic Community and The European Free Trade Association . . . . . 46 Western European Union . . . . . . . . . . . . . . . . . 47 The Messina Conference . . . . . . . . . . . . . . . . . 49 The European Free Trade Association . . . . . . . . . . 54 Ramifications of European Integration . . . . . . . . . 56 Conclusion . . . . . . . . . . . . . . . . . . . . . . . 57 *Conclusion* . . . . . . . . . . . . . . . . . . . . . . . . . 58 The U.S. Role in Unification . . . . . . . . . . . . . . 59 Relevance in 1993 . . . . . . . . . . . . . . . . . . . 60 *Appendices* . . . . . . . . . . . . . . . . . . . . . . . . . 64 *Bibliography* . . . . . . . . . . . . . . . . . . . . . . . . 72 *Index* . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 *A**CKNOWLEDGEMENTS* There are several people that I would like to thank for helping me see this project through. The first would be Professor Jean-Pierre Cap, who began this process more than 18 months ago. His advice and suggestions while I was studying in Dijon were much appreciated, and the background he brought to the Review Committee made the defense as much of a learning experience as the research itself. Secondly, of course, this thesis could not have been finished without the extraordinary help of Dirk van Raemdonck. Between his editing and his ability to elicit more and more analysis out of me, Dirk was instrumental in the success of this thesis. I feel lucky to have been able to work with him, and the friendship that has developed has also been something for which I am thankful. Finally, I wouldn't be writing this without my parents. Their support and care throughout this process were invaluable. This thesis is a culmination of all I've done at Lafayette, and none of it would have been possible without them. For providing for my education, supporting my decisions and, most of all, taking an interest in what I do, I am indebted to them more than they will ever know. Richard P. Klau Easton, PA May 13, 1993 i INTRODUCTION The twentieth century has been perhaps the most volatile century in European history. Boundaries have shifted, vanished, and reappeared repeatedly, alliances were formed and broken on numerous occasions, and more lives were lost in the armed resolution of conflicts than in any other conflicts before on European soil. Whereas the first half of the twentieth century in Europe was marked by high levels of systemic violence, the second half has seen unprecedented cooperation among previously warring nations. The example set by the nations of Western Europe that have been able to boldly put their differences behind them and forge ahead on a path of peace and collaboration is inspiring. Another equally important development in the twentieth century has been the rise to superpower status by the United States. It was not until after the conclusion of World War II that the United States was truly in a position of global leadership. These two developments are by no means disconnected: the growth of the role of the United States in international affairs was arguably at the expense of the European nations, and the U.S. seemed inextricably involved with the events in Europe ii as evidenced by its participation in both World Wars. This purpose of this study is to analyze the relationship between these two entities and the attempts by the United States to help forge this new era of cooperation in Europe after World War II. In 1947, after two years of dim domestic economic performance and understanding the new "global" role it had inherited, the United States sought to ensure that a third world war would not be possible. The situation in Europe was miserable: a dollar shortage, increasing trade deficits, poor agricultural production and a destroyed industrial capacity rendered Europe virtually powerless to reverse the trend of economic stagnation. The Marshall Plan marked the first in a series of steps that would bring the European nations closer to an integrated continent. This U.S. policy was instrumental in revitalizing Europe and allowing Europe to see what was possible. Taking the Marshall Plan as a starting point, this study will look at the significant steps along the path to European union. There was the European Coal and Steel Community, the European Defense Community, Euratom, and then the European Economic Community. In each case, an analysis of what (if any) U.S. activity preceded and followed the announcement of each plan and what attempts were made to assist or hinder the implementation of the plan. The first assumption one might be tempted to make with respect to the effect of U.S. policy towards European unification attempts after an initial study of the Marshall Plan would be iii that the United States attempted to control the process. The sheer amount of money that the U.S. pledged to Europe would lead one to believe that the U.S. would want to control the process as much as possible. This was not the case. While the Marshall Plan was an American plan, the methods for implementation were European, the goals were European, and the success was largely thanks to the incredible planning required by the Europeans. This is not to say that the United States maintained a hands-off treatment of the policy - it is simply to say that the Europeans had more to do with the details of the plan than has been commonly credited. To their credit, the Americans allowed the Europeans to have a significant amount of leeway in implementing the aid package. Even this activity, when viewed in contrast to future activity, was somewhat deliberate. By 1950, U.S. attention had been diverted to Korea by the North Korean invasion of South Korea by the Communist forces and the Europeans were beginning to act on their own with the Schuman Plan and other similar initiatives. After the effort that it took to cement and implement the Marshall Plan, the United States lessened active participation in European activities and allowed Europe to move at its own pace. The reason for this lack of directed activity on the part of the U.S. was that, in reality, management was not necessary. The ultimate goal on the part of the U.S. was economic stability and increased cooperation among European states. It should be noted iv that this goal was not fundamentally humanitarian in nature; the primary lesson of World Wars I and II was that the U.S. could ill afford to ignore events in Europe. Therefore, U.S. interest in stability and increased cooperation indicated an interest in self-preservation. As the countries of Western Europe exhibited more and more autonomy in increasing cooperation among themselves, the United States found itself in the position of not having to direct policy. As U.S. attention shifted elsewhere, Europe was relatively free to explore various options in order to determine the best path to integration. She had successes: the European Coal and Steel Community (ECSC), Euratom, and the Treaty of Rome at the Messina Conference, and she had failures: the European Defense Community (EDC) and the European Free Trade Association (EFTA). Examining these successes and failures, as well as the U.S. reaction and policies with regard to them, will shed light on the nature of the effectiveness of certain policies between the U.S. and Europe from 1945 to 1968. Although U.S. policy towards Europe seemed somewhat passive during these years, much of this behavior can be attributed to the incredible success of the Marshall Plan. Ultimately, it will be shown that, because of this success, the U.S. could afford to spend its time elsewhere. Europe unwittingly obliged the U.S. by continuing along the path to integration, largely because the nations of Europe and the United States shared remarkably common goals. v Beneath U.S. activity (and non-activity), there was what Miriam Camps describes as "the belief `that a strong, prosperous and more unified Western Europe was in the best interests of the United States.'"^1 This belief served as the foundation for much of U.S. policy and, in fact, dictated U.S. policy throughout the formative years of the integration of Europe, up to the creation of the European Economic Community. Finally, the lack of direct U.S. activity in Europe suggests a lack of interest on the part of Americans in taking too strong a position in the affairs of its allies at the genesis of its new-found role as a superpower. _ _ ^1 Ernst H. van der Beugel, _From Marshall Aid to Atlantic_ _Partnership_. (New York: Elsevier Publishing Company, 1966). pp. 310-1. vi CHAPTER 1: The Post-War Period The conclusion of World War II provided a dilemma for world leaders: how to avoid the disaster of 1919. Many believed that the mistakes of the Versailles peace treaty led to the circumstances that created World War II. If possible, the situation in Europe at the close of the war in 1945 was worse than in 1919. World War II increased the division of Europe that World War I had begun and demoralized a continent. All the hopes that had greeted the Armistice in 1918 had evaporated in a second world war and a pervasive sense of despair seemed to grip Europe. The economic situation in Europe was bleak. [see Appendix, "European Economic Indicators"] Using the Six (Belgium, France, Germany, Italy, Luxembourg and the Netherlands) plus the United Kingdom as the model, the damage done to the European economy by World War II was unmistakable. Between 1938 and 1945, agricultural output^1 declined by 31.7%, the number of livestock declined by 23%, and trade was severely disrupted: imports among the Six and England increased by 29% while exports declined by _ _ ^1 "Agricultural Output" was measured in metric tons or thousands of hectoliters for main cereal, potato and sugar beet crops for each country. 1 10% from pre-war levels.^2 Inflation was also a problem, with France and Italy encountering the most difficult problems between 1938 and 1945: 300% and 2300% annualized inflation respectively. In addition, the population figures for the Six and the U.K. reflect the carnage of the war: the overall population in these countries declined by 2.3% between 1938 and 1945, with the male populations suffering disproportionately. In his July 1947 article in _Foreign Affairs_, Hamilton Fish Armstrong described the standard of living in post-war Europe. "Every minute is dedicated to scrounging enough food, clothing and fuel to carry [one] through the next 24 hours." He went on to say that "there is too little of almost everything - too few trains, trams, busses and automobiles to transport people to work on time, let alone take them on holidays."^3 Commenting on this atmosphere in a speech at Z rich University on September 19, 1946, Winston Churchill called it the "tragedy of Europe." He spoke of the "quivering mass of tormented, hungry, care-worn and bewildered human beings gap[ing] at the ruins of their cities and homes."^4 Mr. Armstrong made an alarming observation in his article - that in this atmosphere, "the tendency [among Europeans] is to _ _ ^2 B.R. Mitchell, _International Historical Statistics,_ _Europe: 1750-1988_. (New York: Stockton Press, 1992). ^3 Hamilton Fish Armstrong, "The State of Europe", _Foreign Affairs_ . Volume 25, July 1947. p. 537. ^4 S. Patijn, ed. _Landmarks in European Unity_. (Leyden: A.W. Sijthoff, 1970). p. 27. 2 judge the United States rather severely and to make allowances for Soviet Russia."^5 He explained this claim by noting that American efforts throughout the war led Europeans to believe that America was capable of almost anything; conversely, the Soviet Union suffered a great deal in World War II and, therefore, the Europeans expected less of it. Speaker of the U.S. House of Representatives Sam Rayburn, in a speech to the House on July 13, 1946, said, "I do not want Western Europe ... pushed further into and towards an ideology that I despise."^6 In the July, 1947 issue of _Foreign Affairs_, George Kennan (under the pseudonym "X") detailed what would become American policy towards the Soviet Union for the next 40 years. This article was no doubt encouraged by the European attitudes that were described above by Armstrong. George Kennan outlined the Truman administration's feelings with respect to Soviet expansionist tendencies which unquestionably included Europe. It is clear that the main element of any United States policy toward the Soviet Union must be that of a long-term, patient, but firm and vigilant containment of Russian expansive tendencies. ...[The U.S.] must continue to expect that Soviet policies will reflect ... a cautious, persistent pressure toward the disruption and weakening of all rival influence and rival power.^7 _ _ ^5 Armstrong, p. 538. ^6 Armstrong, p. 538. ^7 X, [George F. Kennan], "The Sources of Soviet Conduct". _Foreign Affairs_, Volume 25:July, 1947). pp. 575- 581. 3 Politically, there was a recognition by the United States that it had erred in 1919 by returning to its isolationist policies. Ernst H. van der Beugel, a European statesman who would later be involved in U.S.-European negotiations on the Marshall Plan, explains, "There was an almost pathetic urge to avoid the errors of 1919 and a repetition of [the] political and economic events leading to the Second World War."^8 Twice in the last thirty years the United States had been pulled into a war in Europe; the U.S. finally understood that it was indelibly linked to the fate of Europe. From this point on, American foreign policy towards Europe would no longer reflect the isolationist tendencies that marked its _entre-guerre_ policies. The first indication of this marked departure from past U.S. foreign policy came with the announcement of the Truman doctrine. Secretary of State James Byrnes announced at the Overseas Press Club in New York on February 28, 1946: In the interest of world peace...we must make it plain that the United States intends to defend the Charter [of the United Nations]. We will not and cannot stand aloof if force of [sic] threat is used contrary to the purposes and principles of the Charter.^9 During the post-war period of 1945-1947, U.S. policymakers were also becoming aware of the limits of the U.S. economy. In adjusted 1982 dollars, the American G.N.P. dropped from $704.5 billion in 1945 to $236.9 billion in 1946, reflecting the _ _ ^8 van der Beugel, p. 19. ^9 van der Beugel, p. 20. 4 difficult transition to a peace-time economy. The post-war recession prevented the U.S. G.N.P. from reaching its 1946 level again until 1950.^10 American leaders were acutely aware of the weaknesses of the post-war American economy. One reliable indicator of the performance of the economy, the index of industrial production, reflected the lack of hope for domestic growth. At the conclusion of the war, the index stood at 24.2 (100=1982). It hit its lowest point in May of 1946 at 18.5, and it would be more than four years until the index would again register at high as its 1945 level.^11 When coupled with the return of hundreds of thousands of veterans who would put immense pressure on the already depressed economy, the outlook for economic stability in the United States was grim. Having recognized its new role within the international community and its economic instability at home, the United States began to realize that its emerging global role was predicated on economics as well as politics. Van der Beugel simply states that "the total ruin of Europe destroyed the hope of economic stability."^12 The United States slowly began to understand that domestic economic stability and growth would hinge upon political and economic stability in Europe. _ _ ^10 Arsen J. Darnay, ed. _Economic Indicators Handbook_. (Detroit: Gale Research Inc., 1992). p. 8. ^11 Darnay, p. 130. ^12 van der Beugel, p. 19. 5 _A__TTITUDES IN EUROPE_ Speaker Rayburn, in his speech to the House, highlighted another characteristic of American attitudes towards Europe: in its relationship with Europe, the focal point of early diplomacy following World War II would be with England. "If we are not allied with the great British democracy, I fear somebody will be and God pity us when we have no ally across the Atlantic Ocean."^13 The feeling that the U.K. should be the principal ally across the Atlantic was based more on pragmatic rather than ideological reasons. The French state had just been resurrected from the ashes of German occupation, West Germany had not yet been created, and Italy had been an enemy in the war. In addition, the Benelux countries (Belgium, Luxembourg and the Netherlands) were not considered large enough to be a primary ally. The U.K. shared a common language, common heritage, and had been the U.S.' principal ally throughout World War II. For the U.S. to foster this image of a "special bond" with the U.K. was thought to be a natural extension of policies already in place. Understanding this focus on Britain increases the need to pay attention to British attitudes towards the future of Europe. In his landmark 1946 speech in Z rich, former Prime Minister Winston Churchill attempted to assess the future and to suggest a _ _ ^13 _Congressional Record_, 82nd Congress, 2nd session. p. 681. 6 remedy to her current crisis. He concluded that the solution to Europe's problems was to be found back across the Atlantic, in a land once ruled by Britain herself. "[We must] recreate the European family, or as much of it as we can. ... We must build a kind of United States of Europe." Central to Churchill's hope for the "European family" was a resolution of the German problem. He explained in the speech: We all know that the two world wars...arose out of the vain passion of a newly-united Germany to play the dominating part in the world. ...Germany must be deprived of the power to rearm and make another aggressive war. ...[However], there must be an end to retribution. We must all turn our backs upon the horrors of the past, ...and we cannot afford to drag forward across the years that are to come the hatreds and revenges which have sprung from the injuries of the past.^14 Churchill bluntly stated that the only hope for peace in Europe was a "partnership between France and Germany." Jean Monnet, one of Europe's great statesmen and a noted businessman when not in public service, seconded this notion in his memoirs, albeit with reservations. (These reservations are explored in the chapter "The European Coal and Steel Community.") Konrad Adenauer, who would later become West Germany's first Chancellor, was quoted in an International News Service interview two years after Churchill's remark as saying that a complete merger between Germany and France was the only solution to European problems. Monnet outlined his own views by saying, "I did not believe at _ _ ^14 Patijn, p. 31. 7 that time that Europe could be built at a stroke. ... Basically, however, I shared Adenauer's views."^15 He continued by saying, "relations between France and Germany could no longer be treated in general terms or with a sense of fatalism."^16 These views led to the acknowledgement by many concerned with the European issue that something had to be done. Europe was clearly incapable of helping itself; between declining economic indicators and little cash with which to invest, European countries were exhausted. After the bitter lessons of two World Wars, the United States realized that she would have to voluntarily increase her role on the international stage in peacetime so that she would not be forced to involuntarily involve herself in wartime once more. The dichotomy behind the reasons for U.S. policies toward Europe mirrored U.S. foreign policy in general. While generally adhering to a basic set of goals (in this case, stability and peace in Europe), the alternating political and economic justification behind specific policies was often multi-faceted and at times seemingly contradictory. This characteristic will be further explored in subsequent chapters. _T__HE MARSHALL PLAN_ It was in these circumstances and with this mentality that _ _ ^15 Jean Monnet, _Memoirs_. (Garden City, NY: Doubleday and Company, 1978). p. 285. ^16 Patijn, p. 31. 8 the United States announced the Marshall Plan, a plan that many contend was the second phase of a comprehensive global policy package - the first being the Truman doctrine. "The genius of the Marshall Plan had been to approach the problem as a whole," wrote J. Robert Schaetzel.^17 The dividing line between economic goals and political goals was blurred on the issue of the American relationship with Europe in the post-war period. Schaetzel wrote, "the demanding economic problems of Europe and the uninhibited thinking of economists opened up all issues for examination, including those which were essentially political."^18 The distinction between political and economic justification for U.S. involvement is a necessary one to make if we are to establish the effectiveness of U.S. policy with respect to Europe. If the Marshall Plan was primarily a political tool, the criteria necessary for judging the plan a success or failure should be noticeably different than the criteria for judging an economic plan. In either case, any judgments must be made within the context of the post-war period: understanding that both political and economic factors were affecting U.S. decisions is necessary in order to comprehend later actions by the U.S. government. In the two years that separated World War II from the announcement of the Marshall Plan, the United States had _ _ ^17 J. Robert Schaetzel, _The Unhinged Alliance: America_ _and the European Community_. (New York: Harper & Row, Publishers, 1975.) p. 37. ^18 Schaetzel, p. 37-8. 9 responded with several "ad hoc" aid packages. Specific requests for aid were generally granted and the end result was that the U.S. was treating the result rather than the cause of the European problem. June 5, 1947, marked the reversal of this tendency. Secretary of State George C. Marshall gave a speech at Harvard University that would permanently alter the course of both European and American history. The rehabilitation of the economic structure of Europe quite evidently will require a much longer time and greater effort than had been foreseen. ...Europe's requirements for the next three or four years... - principally from America - are so much greater than her present ability to pay that she must have substantial additional help or face economic, social, and political deterioration of a very grave character.^19 Marshall went on to say that any American decision should be a "cure rather than a mere palliative," and that the countries in Europe to receive this aid should first agree as to how the aid would be distributed. His comments would lay the groundwork for the first modern incarnation of a European organization. Marshall's announcement was a momentous step forward in American foreign policy. In stating the goals for the plan, Marshall tacitly underscored the emerging interdependence of the two continents and indicated an innovative approach to eliminate the conditions that had led to two World Wars. The dismal economic situation in Europe, coupled with _ _ ^19 van der Beugel, pp. 50-1. 10 uncertain conditions in the United States, indicated to most Western leaders that drastic action was necessary. Europe was in no position to help itself and the United States found itself alone as a nation with the resources and will to promote stability to combat what was perceived as the Soviet threat. The distinction between political and economic factors has been discussed and will continue to be a primary component in analyzing the goals and effectiveness of U.S. policy towards European integration. 11 CHAPTER 2: The Marshall Plan When asked about the growing post-war trade deficit in Europe, the British Chancellor of the Exchequer claimed that it was "by far the greatest and gravest of the immediate economic problems to be faced."^1 Mr. Dalton was referring to the United Kingdom, however these comments could very well have applied to the whole of Europe. Claimed _The Economist_ in May of 1947, "More and more, as week succeeds week, the whole of European life is being overshadowed by the Great Dollar Shortage."^2 The Dollar Shortage that _The Economist_ was referring to became an issue of great concern in Europe as well as the United States. The principle behind this crisis was relatively simple: as the West European countries continued to import more from the United States [see Appendix, "European Trade Deficit"], European currency reserves of dollars diminished. The short term effects of this were frightening to many in Europe who saw that the dollar was becoming the global currency; if Europeans had fewer dollars, their ability to sustain any respectable growth would be _ _ ^1 "Dollars for Europe?" _The Economist_, May 31, 1947. p. 833. ^2 "Dollars for Europe?" p. 833. 12 limited at best. The article's author proposed that the European crisis necessitated American aid. Indeed, there is something in the present situation that ... [suggests] that Europe could only be saved by America, but nobody could see how America could be persuaded, in time, to undertake the rescue operation.^3 Whatever the attitude in the United States, it seemed that the dollar shortage would indeed be the first test of American "globalism". The Truman doctrine assured the world that Americans would step in to combat aggression; would they now show the world that they would step in to ensure peace? Many historians point to February 21, 1947 as the day that the United States officially assumed the helm as the preeminent Western power. It was on this day that the British government notified the United States that it was incapable of continuing its economic and military aid to Greece and Turkey. Coupled with the aforementioned dollar shortage, Britain was simply powerless to continue its role of global leader: the World War had exhausted British reserves and her economy was crippled. The plight of the United Kingdom was merely indicative of the larger problem throughout Europe: the U.K. was perhaps the strongest of the European countries at the time, but this strength, relatively speaking, was not substantial enough to allow for significant efforts abroad. This swift transfer of power solidified the idea that "Great Britain was exhausted and impoverished. Germany did _ _ ^3 "Dollars for Europe?", p. 834. 13 not exist; France was barely alive; defeated Italy did not count; and the smaller countries were not important."^4 This milestone for the United Kingdom and the United States is significant because it forcefully drove the point home with U.S. lawmakers that they were now in charge. The U.K., in abandoning Greece and Turkey, had defaulted on her remaining economic and military obligations in Europe; the country that had once acted to maintain peace (or balance the powers) in Europe could no longer sustain that responsibility. If there had been any doubt in the U.S. as to her new position in the world, this erased it. The gravity of this moment cannot be overemphasized - an unprecedented transfer of global responsibility had occurred and would establish the United States as the uncontested leader among the western democracies. The U.S.' answer to the European crisis was delivered by George Marshall in his speech at Harvard. By conveying the impression that the United States was willing to help, Marshall sought to calm European fears that the U.S. would not be up to the challenge of European rehabilitation. The reaction in Europe was swift. Jean Monnet admitted to being surprised by the alacrity with which the Plan was announced. Helmut Schmidt, future chancellor of West Germany, as a college student speaks in his memoirs about the impression this announcement had on Europeans, noting the obvious generosity of _ _ ^4 Hans A. Schmitt, _The Path to European Union_. (Baton Rouge: Louisiana State University Press, 1962). p. 19. 14 the Americans and George Marshall in particular.^5 British Prime Minister Ernest Bevin reacted a week after the Plan's announcement by saying: I can only say to other nations that when the United States throws a bridge to link east and west, it would be disastrous for ideological or other reasons to frustrate the United States in this great endeavor.^6 Marshall's genius inherent in the Plan was that the onus of implementation was on the European beneficiaries and not on the United States. In doing so, the Plan gave the Europeans a large degree of latitude in the allocation of funds as well as the organization of the distribution of the funds. This was necessary if the Americans were to avoid the stigma of dictating to the Plan's beneficiaries what they would do and when, as well as the blame if anything went wrong. One intriguing result of this emphasis was that there was some uncertainty as to whether or not the Soviet Union and its satellites would be included under the Marshall Plan umbrella. Marshall said in his Harvard address, "any government that is willing to assist in the task of recovery will find full cooperation ... on the part of the United States Government."^7 The fact that it was up to the countries themselves to determine _ _ ^5 Helmut Schmidt, _Men and Powers_. (New York: Random House, 1989). pp. 129-130. ^6 van der Beugel, p. 58. ^7 van der Beugel, pp. 50-1. 15 who was to benefit from the plan left open the possibility that the Soviet Union and her satellites would be allowed to take part in the recovery plan. Schmitt tells us that American policy makers wished to avoid any impression that the Marshall Plan was an attempt to divide Europe.^8 More than anything, the symbolic significance of the Marshall Plan was that it indicated a peaceful gesture on the part of the United States to _reunite_ Europe. Lest this be forgotten, Marshall and his colleagues wanted to avoid giving the impression that they were attempting to split Europe. Reacting to the unexpected possibility that the U.S.S.R. could be included, an informal understanding was reached between Marshall and President Truman that the same rules would apply to the Soviet Union as applied to the rest of Europe. In the absence of proof to the contrary, the U.S. seemed sincere in her offer to extend the Marshall Plan to the Soviet Union. Said one State Department official: There was nothing said or done or _even felt_ during that period to suggest that the offer was not quite honest, and it was explicitly recognized that there would be advantages and disadvantages to Russian participation.^9 However, it was not to be. Heading the Russian delegation at the Big Four meeting in Paris on July 2, 1947 was Vyacheslav Molotov. After reading the plan, he announced that it was a thinly-veiled attack on European economic independence and he therefore refused _ _ ^8 Schmitt, p. 21. ^9 Schmitt, p. 22. 16 to participate. This decision was binding for the satellites, and the issue was averted. However, the Marshall Plan has the dubious distinction of inadvertently finalizing the economic division of Europe while trying to unite it. By clearly designating the countries that would benefit directly from American aid, an intangible (yet altogether real) line of demarcation was drawn in Europe. _T__HE PARIS CONFERENCE_ The Marshall Plan required that European countries which would benefit from the package would first have to meet together in order to determine exactly what it was that was they needed from the United States. From the beginning, the United States attempted to avoid dictating conditions or rules for the process that would lead to the implementation of the Marshall Plan. The Truman administration encouraged its counterparts in Europe to organize the conference on their own and report to the U.S. when it had compiled a list of what was necessary for the resuscitation of Europe. As a result, the English and French worked together to organize the Paris Conference. The Anglo-French invitation to meet in Paris was extended to 22 countries less than a month after Marshall's announcement, yet there was no clear concept of what was expected of the attendees. It should be noted that the U.S. was not represented at the conference. However, according to van der Beugel, U.S. Ambassador to Paris Caffrey purportedly maintained various 17 "informal" contacts with the delegations at the conference. There were no guidelines for the fourteen countries^10 that were attending the July conference - the U.S. had agreed to provide only "friendly advice" during the conference and would therefore take no active role, although circumstances would alter this in the later stages of the conference.^11 From this, it is fair to conclude that the U.S. was true to its claim that Europe must determine what it needs without outside interference. It was imperative for the U.S. to have a clear understanding of what Europe wanted. Quite obviously, the United States had two motives for such a requirement: not only would such an approach give the U.S. a clear European mandate in its fulfillment of Marshall's pledge, but, should the plan fail, the U.S. could not be accused of misunderstanding European concerns. The Committee on European Economic Cooperation (CEEC) was created as an inter-governmental organization that would organize the meeting in Paris. The CEEC's role was limited: its existence was limited to the Paris Conference and it was conceived as a convenient vehicle to expedite certain decisions and processes during the conference. It did not possess any real authority; as such, it is best to think of the CEEC as the moderator of this _ _ ^10 Austria, Belgium, Denmark, France, Greece, Iceland, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal, Sweden, Switzerland, Turkey and the United Kingdom. The Soviet Union and her satellites did not attend. ^11 van der Beugel, p. 77. 18 conference. The Conference proceeded slowly and the final compilation of data, released six weeks after the conference began, suggested a package of $28 billion in aid for European recovery. The general feeling among conference members was that this amount represented an ideal that would be too large for American approval and that would encourage overwhelmingly negative reaction across the Atlantic. Up to this point, the conference members were acting more on a general understanding of the U.S. position and were not reacting to official U.S. policy. U.S. involvement changed drastically when Clayton, Kennan, and several other high-ranking U.S. administration members met in Paris with conference officials. This meeting was at least in part brought about by the apparent lack of focus at the Paris conference. Clayton released seven guidelines that he claimed would greatly influence the ultimate draft of the report. These seven guidelines were: 1. Europe should prove that after four years she would be self-sufficient. 2. The balance of payments deficit of member countries to the dollar area should be eradicated by 1951. 3. Specific promises should be given by participating countries with respect to industrial production programs. 4. Long-term capital investments should be excluded from U.S. aid. 5. Participating countries should take effective steps to create internal monetary and financial stability. 6. Steps should be taken to diminish trade barriers, with the eventual goal of complete conformity with the International Trade Organization. 7. A permanent organization should be created 19 for the management of the recovery plan.^12 Of these suggestions, the seventh is perhaps the most important within the context of the aim of this paper. Whether or not it was the express purpose of the U.S. policymakers, the announcement that Marshall aid would hinge on the creation of some full-time, pan-European organization sent a clear message to the conference participants. Marshall aid was not intended to just get Europe back on its feet; it was now clear that a significant component of the Marshall plan would be the redirection of European political and economic evolution and the insurance of its future stability through some form of integration. The extent of this integration will be analyzed later in this study. These guidelines were still to be considered "friendly advice" and not orders and the Europeans at the meeting felt that this was reasonable. After all, it was still understood who was giving the aid. Although the Europeans needed the aid, the Americans were not bound to provide it. Consequently, the Europeans at the conference realized that they had little leverage and that they could only ask for so much.^13 As they neared the self-imposed deadline of September 1, 1947, activity among those at the conference increased dramatically and a great effort was made to trim the original requests and meet the U.S. guidelines. The final report reflected this effort, as monetary _ _ ^12 van der Beugel, p. 80. ^13 van der Beugel, p. 80. 20 requests were trimmed significantly, it called for the creation of a "European" organization and somewhat detailed descriptions were included about the future prospects for internal monetary stability among aid recipients. It was now up to the U.S. to ratify the report and begin the massive aid effort. _W__ASHINGTON'S TURN_ The original goal of the Marshall Plan, based on the CEEC report, was to pledge to Europe $17 billion over four years. At the time the Marshall Plan was announced, the U.S. G.N.P. amounted to $212.4 billion. Marshall and Truman realized that asking to pledge a full 8% of the country's G.N.P. to several foreign countries (even if it was phased in over four years) would be very hard to push through Congress. As a result, they amended the original request to Congress and decided that the commitment would remain for the agreed-upon four years, however, the actual amount of aid in any given year would fluctuate based on a review by a Congressional committee. As the ensuing debate in Congress demonstrated, the reasons for supporting a stable, more united Europe were varied. For some, economic reconstruction of Europe with American funds presented a unique opportunity to mold a large economic bloc into a close alliance with the United States. Those who saw the European situation as a tug-of-war in a nascent bipolar system surmised that this was an opportunity to maintain the balance of power in a potential conflict area. Still others perceived 21 Europe in the context of George Kennan's containment theory: by solidifying the alliance with Europe, the United States could prevent Soviet expansionist tendencies. It should be noted that these views are not mutually exclusive and it would be a grave mistake to suggest that any of the three were more important than the others. As the U.S. was slowly beginning to realize, stability in any region (including its own) was based on a combination of the three factors: political, economic and security. It would be impossible to base aid on economic needs alone while ignoring the military or political causes and the implications of such aid. Consequently, the adaptation of the Marshall Plan, while possibly not based on a consensus of reasons for its execution, should be seen as an agreement by the U.S. legislative branch that each argument had its worth. While interesting in its own right, the process of approving the Marshall Plan is not directly related to this study. For our purposes, it is only important to know that it indeed did pass. _T__HE ORGANIZATION FOR EUROPEAN ECONOMIC COOPERATION_ The OEEC was founded in 1948 by mutual agreement of the fourteen countries that were to be recipients of Marshall Plan aid. Due to the divergent interests among member countries, the OEEC can be considered a compromise organization. Certain countries within this group entertained dreams of a federal Europe and were interested in a European organization with strong 22 supranational powers. Others were less interested in sacrificing their own sovereignty and refused to allow the creation of a such an association. While it was necessary to create some permanent entity to fulfill their end of the bargain, Britain, wary of entering into a federalist-like agreement, shied away from creating an alliance that would give too much power to an organization not directly under British control. Miriam Camps, a member of the British Foreign Office from the conclusion of World War II to 1954 said of her government's attitude towards the federal tendencies in Europe: All British Governments, Labour and Conservative alike, looked at their European relationship as [having] no overriding priority. ...Co-operation with Europe was desirable; integration with Europe was not.^14 This compromise organization allowed for very different conceptions of what the OEEC's role was in the European Recovery Plan (ERP), as it became known. Some saw it as a vehicle that could help bring Europe closer to a quasi-federal existence, while others felt that it would ultimately usurp sovereignty from its members. The compromise was reached between the fourteen members and had no help from the United States. Even the die- hard federalists realized that the first step towards a closer union could not be too strong. Jean Monnet would later talk about building his United States of Europe "step by step." While _ _ ^14 Miriam Camps, _Britain and the European Community:_ _1955-1963_. (Princeton: Princeton University Press, 1964). p. 4. 23 somewhat tentative, the OEEC was still significant in that it brought together fourteen somewhat divergent opinions and succeeded. The creation of "European" organizations continued beyond the OEEC; national planning associations arose in several of the OEEC countries. These organizations acted as the de facto national representatives that handled the local implementation of the ERP. The significance of the existence of such organizations cannot be stressed enough; the success that Europe would enjoy with the implementation through the OEEC and the achievement of the subsidiary planning associations laid the groundwork for future alliances in Europe. Determining "intent" in an administration's policies is always somewhat difficult. Whether or not the United States intended for the creation of future "integrated" organizations is difficult to assess, but it is largely secondary to the fact that said organizations came into existence because of the United States. Intent is not always tied to impact, and it certainly is not in this case. The mere fact that the U.S. insisted on the creation of a pan-European implementation organization allows us to form certain conclusions. Prior to the seven guidelines laid down by Clayton, pan-European associations were seen as little more than dreams of federalists like Churchill and Jean Monnet. Because the Paris Conference members were not presented with a choice - "advice" or not, it was understood that receipt of aid was largely contingent on compliance with the guidelines - the 24 European nations forged ahead, created the OEEC, and were largely successful. The success of the OEEC and its subsidiary planning associations was proof that the Europeans (most notably France and Germany) could ignore past differences and cooperate to some extent. Thus, the seeds for European cooperation were being sown. Subsequent chapters will show that other efforts by Europeans to act in concert were largely based on the assumption that cooperation on the scale of the European Recovery Plan would be possible again. Such visionary attempts as the European Coal and Steel Community, the European Defense Community, and the European Economic Community, were all to a large degree possible because the United States had shown the Europeans that large-scale cooperation was indeed possible. 25 CHAPTER 3: The European Coal and Steel Community A United Europe will not be achieved all at once, nor in a single framework: it will be formed by concrete measures which first of all create a solidarity in fact. The uniting of the European nations requires that the age-old opposition between France and Germany be eliminated.^1 With this declaration, French Minister of Foreign Affairs Robert Schuman launched the Schuman Plan, which would become the European Coal and Steel Community (ECSC). The architect behind the Schuman Plan was not actually Robert Schuman. The designs for the ECSC originated with Jean Monnet in early 1950. At the time, Monnet headed the French State Planning Office, a division of the French government whose main concern was establishing a coherent "transformation" into a contemporary society. In short, the office existed as a typically French bureaucratic answer to the difficult question of how to restructure French society to handle post-war problems and establish a capable program for the future. Monnet was unabashedly federalist in his beliefs and his actions from World War II until his death indicate his repeated attempts to forge a closer union among European countries. As he _ _ ^1 Patijn, p. 47. 26 saw it, the central obstacle to creating a more united Europe was the continued estrangement between France and Germany. The more common term for this impediment was the "German problem." According to Monnet, the key obstacle in resolving the "German problem" was a French fear of German industrialization. Monnet felt that international relationships are very often based on psychological aspects and not necessarily rational grounds and he had no doubts that this was such an occasion. Settling this issue between the two countries would involve a complete resolution of the factors underlying this fear; Monnet explained that Schuman met with Bevin and Dean Acheson in May of 1950 with "no constructive proposals [for a resolution of the German problem] ... although he had pondered deeply and consulted many people. Myself, I was beginning to see more clearly."^2 Monnet's solution involved tying French and German industry to each other. The idea evolved from the simple premise that the natives of the Saar, Alsace and Lorraine had an essential commonality: they shared the same industrial basin. German Chancellor Adenauer had repeatedly been quoted as claiming that a political union of France and Germany was the best possible solution to the "German problem". Monnet agreed, insofar as a merger of sorts would be necessary. The degree to which the two would merge was another issue. In a meeting with Paul Reuter, professor of international law at University of Aix-la-Chapelle and legal advisor to the French Foreign Office, Monnet primed _ _ ^2 Monnet, p. 292. 27 Reuter for answers. Monnet felt that some sort of union was necessary, however, he and Reuter were in agreement when Monnet stated that a "political [union] would be impossible, but an economic organization might work."^3 Even at its inception, the Monnet Plan (which would later become the Schuman Plan) was characterized by certain interesting characteristics. Most importantly, this was a _European_ idea. The ECSC represents the genesis of a true European initiative for European integration whereas the Marshall Plan was an American policy that involved Europe. No longer were the policymakers talking in the abstract about far-off goals of federal union a ` la Churchill; 1950 marks the first year that Europeans began to take an active and independent role in deciding where their road would lead. The ECSC proposal centered on coal and steel for two simple reasons: the Alsace, Lorraine, and Saar regions shared a common mineral base and these regions had shifted between French and German control over the centuries. The cooperation involving these regions would not only have economic benefits - it would also be of great symbolic value as well. In displaying their ability to cooperate over a previously contested area, the two governments would be demonstrating that they had indeed progressed beyond settling their differences with armed force. In subsequent meetings with Reuter, Monnet constructed the _ _ ^3 Merry and Serge Bromberger, _Jean Monnet and the United_ _States of Europe_. (New York: Coward-McCann, 1969). p. 96. 28 blueprints for what he has claimed is the founding document of the European Community. Monnet and Reuter were satisfied that they had found a resolution to at least part of the problem. Monnet was in no position to personally propose such a solution - his position in the Planning Office certainly did not allow him enough political clout to independently announce French policy. In his memoirs, Monnet acknowledged his need for allies: "I had to find someone who had the power, and the courage to use it to trigger off so great a change. Robert Schuman seemed the ideal man to do so."^4 Schuman, faced with recession on the eve of the Korean War and declining steel orders in France, reacted positively to the plan. The Marshall Plan, while largely a success, had by no means cured Europe's ills. In addition, the French government had recognized the Saar region as autonomous several months prior to the announcement of the Schuman Plan. This put Chancellor Adenauer in a difficult position as he was struggling to sustain the emerging West German state. Schuman immediately recognized the potential inherent in Monnet's plan, adopted it as his own, and presented the plan in a press conference on May 10, 1950. The press conference approach is cited as one of the reasons for its success. He went public with the Plan, and, in doing so, demonstrated his confidence in the initiative as well as his shrewd public relations skills.^5 _ _ ^4 Monnet, p. 298. ^5 Schmitt, p. 61. 29 Perhaps more significant than the goal of the ECSC was the ambition which Monnet and Schuman brought with them to the negotiating table, where they would face skeptical colleagues from West Germany, Belgium and other countries. Monnet envisioned the ECSC not as an organization unto itself; rather, the ECSC was to be the first step in a process that would lead to a federal Europe. In a text released after the first round of negotiations between the six participating countries^6 , Monnet made clear his intentions: Over and above coal and steel, it is laying the foundations of a European federation. In a federation, no State can secede by its own unilateral decision. Similarly, there can be no Community except among nations which commit themselves to it with no limit and no looking back.^7 It is not hard to imagine the reactions that such an announcement produced among Monnet's detractors. Despite such resistance, public reaction in France and throughout the participating countries was largely supportive of a plan that would seemingly preserve peace. The three - Monnet, Schuman and Adenauer - forged ahead, hoping to capitalize on this wave of public sentiment. Adenauer sought support at home by announcing that the economic aspects of the plan were secondary to the main goal which was largely symbolic. Addressing the Bundestag on June 13, 1950, Adenauer stated that "the importance of this _ _ ^6 Belgium, France, Germany, Luxembourg, the Netherlands and the United Kingdom. ^7 Monnet, p. 326. 30 project is above all political and not economic."^8 In what would provide a model for later stages of European unification (not coincidentally, exactly how Monnet envisioned it), the creation of the ECSC brought with it a somewhat independent controlling body. This body, named the High Command, was funded through a coal tax and not subsidized by the participating governments. Thus, it possessed autonomy to the extent that it made its own decisions (although each country had veto power if it felt that the decision was contrary to the aims of the ECSC). This represented the first attempt by the six countries to give up a small amount of sovereignty in return for long-term benefits. Even five years earlier, at the close of World War II, the thought of these countries not only working together, but accepting direction from an organization not directly under their control would have been unthinkable. While much remained to be done, the progress that had been achieved was nothing short of remarkable. While the High Command was not totally independent, the degree of latitude allowed by the founding countries is still significant. Van der Beugel assessed the shift of initiative for European integration and its impact on American policy: [Until] 1950, there was a causal link between American foreign policy and the concrete and practical forms of European cooperation and integration. While the monopoly of power remained on the American side of the Ocean, with the announcement of the Schuman Plan, the initiative for a concrete and major step _ _ ^8 Monnet, p. 321. 31 on the road to European unity shifted to Europe.^9 Schuman's announcement, as van der Beugel notes, triggered a definitive shift in American activity towards Europe. Political and economic rehabilitation were the goals manifest in the Marshall Plan; the Americans understood that this would not be achieved in four short years - the Marshall Plan was but the first step toward this end. However, the first step appears to be all that the Americans were interested in proposing. Their end of the bargain had been satisfied; they had provided the necessary tools for beginning the long process of rehabilitating Europe. Why was the American government so willing to stop guiding Europe? There is the possibility that the United States was simply not interested in playing a pivotal role in the development of the integration of the European continent. This is unlikely for several reasons. First of all, after investing such a large amount of money and prestige in the Marshall Plan, the thought of abandoning this investment so early seems unlikely. In addition, the United States' desire to avoid the protectionist mistakes of the post-World War I era has already been mentioned. If the U.S. had a chance to play a part in the maintenance of peace in Europe it certainly would take advantage of it. Secondly, there is the possibility that the U.S. was _ _ ^9 van der Beugel, pp. 231-2. 32 incapable of continuing its guiding role that it began with the Marshall Plan. While not completely valid, this is closer to the truth than the first answer. The period of 1947-1951 marked the first economic test of the United States' new-found global role; the aforementioned Korean conflict would mark its first military test. The Cold War was heating up and the United States could ill afford to divert attention from the Korean crisis - just as Europe demanded the U.S.' full attention earlier, so would Korea. The U.S. simply did not have the ability to adequately attend to both situations. Secondly, the ECSC represented a step for Europe in the right direction. Secretary of State Dean Acheson sent Jean Monnet a message following the announcement of the Schuman plan indicating the U.S.' support of the ECSC: "It is the intention of the United States to give the Coal and Steel Community the strong support that its importance to the political and economic unification of Europe warrants."^10 This support for a non-American proposal stems from the fact that, at this juncture, European and American goals for Europe largely overlapped. Recall the American guidelines at the Paris Conference of the OEEC: U.S. policy-makers were genuinely interested in strengthening Europe. The conflict in Korea only served to reinforce the American belief in George Kennan's sentiments in his famous 1947 article in _Foreign Affairs_ - the Communist idealogy surely included expansionist goals. A management of peace in Europe was essential to the promotion of _ _ ^10 Monnet, p. 379. 33 an equilibrium and the Schuman Plan indicated to the United States that Europe was sincere in its efforts to avert past tragedies. In addition, such stability would mean that Europe would be increasingly able to withstand any Communist subversion. The U.S. activity (or lack thereof) with respect to the announcement of the Schuman Plan supports the contention that the United States was genuinely interested in allowing the Europeans a significant amount of freedom in determining their future as long as it was in keeping with U.S. goals. However, the lack of concrete activity either or for or against the policy is puzzling for its marked departure from the management that accompanied the Marshall Plan. While the Schuman Plan was not an American initiative, it is still fair to assume that the United States would follow up on its significant investment with at least a cursory attempt at maintaining involvement in the process of European unification. There is no obvious evidence that the U.S. attempted to do anything during this period to encourage or discourage the development the ECSC until Acheson's note to Monnet. The support from the U.S. (if it can be called that) was passive. The Schuman initiative left little room for American involvement. This served two purposes: it reinforced the perception that the Schuman Plan was a European plan, and it also alleviated the financial burden of European rehabilitation on the U.S. _E__URATOM_ 34 By and large, European leaders had reconciled themselves to the fact that, following World War II, the international system had become bi-polar in nature and this system did not directly involve any countries in Europe. Many in Europe believed that the "great power status" had been conferred upon the United States and the Soviet Union because of their harnessing of nuclear power and nuclear weapons. It was in this context that in 1956 many in Europe began to consider a possible energy initiative that would be loosely based on the ECSC. No single European country in 1955 had the resources, the wealth, or the manpower to develop nuclear energy or weapons. European financial recovery, while on its way, was by no means complete. Devoting such a large portion of any nation's economy to nuclear research seemed foolhardy. Thanks to the Schuman Plan, there was another way for these countries to approach this task: cooperation with coal and steel had proven that a clearly- defined common goal could be achieved by pooling resources and sharing expenses. Once again, cooperation was suggested over competition. Headed by Paul-Henri Spaak, an action committee was created to analyze potential plans for an atomic union. This committee would also lay the groundwork for the European Community (to be discussed later). In their preliminary text, the action committee outlined the reasoning behind seeking an atomic union. The development of atomic energy for peaceful uses opens the prospect of a new industrial revolution. ... Together, our countries are capable of 35 ... developing a nuclear industry. They form the only region in the world that can attain the same level as the great world Powers. Yet separately they will not be able to overcome their time-lag which is a consequence of European disunity.^11 Not only does this committee's statement indicate a desire to increase the number of joint ventures, this represented a deliberate attempt to pull Europe back up from second-class status on the world scene and reestablish some semblance of European power reminiscent of past decades. The European Atomic Energy Community (Euratom) and the ECSC held many things in common. The announcement of an atomic union would have symbolic repercussions as had been the case with the ECSC. There were several advantages to creating Euratom; because atomic energy was a new field in Europe, there were, as Miriam Camps suggests, "no vested interests to be overcome."^12 Like the ECSC, Euratom involved a precise endeavor with definable objectives. The circumstances in creating a pooled atomic energy research group were similar to creating the coal and steel community, and past success with the ECSC suggested that Euratom might achieve similar results. Around the time that Euratom was proposed, similar plans were evolving for a European Economic Community (EEC). In retrospect, Euratom can be seen as a precursor to the EEC because of the similarity in organization and the scope of its _ _ ^11 Monnet, p. 419. ^12 Camps, p. 55. 36 intentions. However, opinions were divided as to which plan should be given more emphasis. It was Monnet's opinion that atomic energy could be used for publicity much more effectively than quotas and tariffs could be.^13 Monnet felt that this was an important factor in seizing the momentum for the United States of Europe. Just as the Marshall Plan had paved the way for Monnet and Schuman to make their announcement, the Euratom alliance would not have been possible without the precedent set by the Schuman Plan. Its success, as well as its model for cooperation, provided substantial justification for suggesting an atomic energy alliance. Monnet was right in acknowledging a momentum in Europe; to achieve his desired results, small but significant successes like the ECSC and Euratom made future successes more likely. The effect of these integration efforts on the United States and the United States' effect on this process were both negligible largely due to the lack of activity on the part of the United States. Neither the ECSC nor Euratom directly threatened U.S. interests either at home or abroad. For this reason, the U.S. did not react adversely while both plans developed. As has been suggested, the overlapping of U.S. long-term goals and European goals allowed the United States to benefit from European progress without having to try and control the process. This allowed the U.S. to focus on the crisis in Korea without worrying _ _ ^13 Camps, p. 55. 37 about the ECSC or Euratom running counter to U.S. interests. The lack of American activity did not lead the Europeans to believe that the U.S. was no longer interested, however. As will be shown in subsequent chapters, U.S. foreign policy would again focus on certain aspects of European integration and attempt to help guide the process. It is probably fair to suggest that the Europeans were well aware of the United States' interest in Europe and that they understood that the lack of activity during this particular process was not necessarily indicative of a lack of interest. The ECSC and Euratom were the first great milestones of pan- Europeanism; the idea that the countries involved could work together to develop a mutually beneficial resource instead of competing against one another was, although relatively new, developing into a true guiding principle. The alacrity with which these two plans were announced suggests that a momentum was being built from one plan to another: the Marshall Plan showed what was possible, the Schuman Plan exploited the idea further for symbolic as well as economic means, and Euratom expanded on the idea so that the countries of Europe could return to the collective position of power she had held in decades past. 38 CHAPTER 4: The European Defense Community The story of European integration is not composed entirely of successes. The European Defense Community (EDC) represents a decided departure from the success of past efforts and offers a perfect case study of how American foreign policy and European efforts had both become ultimately misguided and ineffective. That the EDC failed is not nearly as important as determining _why_ it failed; establishing the causes of this failure will demonstrate the limits of American foreign policy's effectiveness in Europe as well as the boundaries of progress for the European federalists. In his study of American policy and European union, Ernst H. van der Beugel states that: While it is true that American foreign policy towards Europe [from 1950 to 1954] had as one of its primary objectives the inclusion of German military strength in the defense of the West, it is equally true that ... agreement on the framework in which this contribution could best be embodied was a matter of controversy.^1 With this in mind, the period from 1950 to 1954 provides a revealing look at American attitudes towards the progress that _ _ ^1 van der Beugel, p. 249. 39 Europeans were experiencing in their attempts at cooperating. This period coincides with the invasion of South Korea by Communist North Koreans in 1950 and ends with the rejection of the European Defense Community (EDC) by the French Assemble ' e Nationale in 1954. While it has been argued that American attention shifted from Europe to Korea when the Korean conflict began, it is foolhardy to suggest that American policymakers did not monitor events occurring elsewhere that would affect American interests. Such is the case with the EDC. It should be noted that the idea for the EDC was European. Unto itself, this is not extremely significant. However, in light of the events preceding it, the attempt to create the EDC further strengthens the theory that Europeans, and not outsiders, were shaping the future of Europe. Of note is the fact that the EDC provided the Americans with a compromise of sorts for the "controversy" described by van der Beugel. It addressed the idea of Germany playing an increased role in her own defense, it indicated a certain level of cooperation among Germany's principal allies and it precluded any direct American involvement. As was the situation with the ECSC, a European initiative killed two birds with one stone: it achieved what the Americans saw as their goals without necessitating any direct American activity. The Americans could continue to focus on Korea and not lose any strategic importance in Europe. Another characteristic of a modified American foreign policy 40 was evident in the U.S.' general attitude towards Europe: no longer focused on recovery, the threat of Soviet expansion compelled the U.S. to concentrate on rearming Europe so that she might defend herself against Soviet attack. Kennan's prophecies of Soviet expansionist tendencies were being heeded as the Cold War heated up. _N__ATO_ In light of the need to balance power in Europe, the North Atlantic Treaty Organization (NATO) evolved as the West's solution. Its precursor was the Vandenberg resolution, which was passed in 1948 by the Senate. While deliberately vague as to the circumstances that would result in U.S. reaction, the resolution essentially laid the groundwork for U.S. action in case a situation arose that violated U.S. national security. The term "national security" was enough to render the resolution ambiguous, but the importance of the resolution was twofold: it was both an explicit message to the U.S.S.R. as well as a broad definition of national security that could justify future actions. Senator Vandenberg was the driving force behind NATO. NATO was essentially two pacts in one: militarily, an attack on a NATO country^2 would constitute an attack on all of them and each _ _ ^2 Belgium, Canada, Denmark, France, Germany (FRG), Greece, Iceland, Italy, Luxembourg, the Netherlands, Norway, Portugal, Spain, Turkey, the United Kingdom and the United 41 country would participate in the defense of the attacked country. Politically, the creation of an institution that recognized that "certain areas of Europe were vital to [U.S.] security"^3 was more essential in creating the appearance of cohesion in Western Europe. This became the foundation of the "Atlantic Partnership" that would define Cold War diplomacy for the next 40 years. It goes without saying that NATO has been one of the great successes of Cold War diplomacy, however it failed to address the issue of German rearmament. Europe was not ready in 1954 for a rearmed Germany, a Germany that had been created only five years before NATO. As will be shown, Germany itself was not ready for rearmament. For these reasons, NATO failed _by design_ to confront the important issue of German rearmament and left it to be handled at a later date. _A__CTIVITY IN EUROPE_ In spite of the momentum engineered by Monnet and others with the success of the ECSC, European federalists were bound to encounter a failure. This failure would appear in the form of the EDC. Originally envisioned as a European army, the EDC is a perfect example of a good plan gone bad due to endless compromises and certain governments tenaciously clinging to pre- World War II prejudices. _ _ States. ^3 James Reston, "NATO", _The New York Times_. (February 20, 1949). 42 Around the same time as the ECSC was being proposed, European leaders felt compelled to demonstrate their new-found cooperation by somehow reacting to the emerging Korean War. The superpowers had already announced their response and many in Europe felt that a "European" response (as opposed to individual responses from each country) would show their continued progress. The first documented call for a European Army was made by German Chancellor Adenauer, following a visit by American Secretary of State Dean Acheson in December of 1949. Adenauer was addressing the issue of a need for Germany to defend itself within the unique context of recent history. The Allies disarmed Germany. They must insure her defense. ...Should they ask us to participate in insuring the security of Europe, I would not favor an independent _Wehrmacht_ but rather a German contingent within a European fighting force.^4 Adenauer's logic seems both a tacit acknowledgment of the unaccepatability of an independent German army while at the same time an assumption that to be a full member of the European community Germany would need to assume fuller responsibilities, including those of a military. Without the impetus of Korea, Adenauer's idea would probably not have found the broad support that it did. Once again, Monnet and Reuter discussed the idea _ _ ^4 Bromberger, p. 109. 43 and found that both agreed that something was necessary and the Adenauer proposal subsequently served as the foundation for their new proposal.^5 Monnet and others were smart enough to realize that World War II was only five years behind them and that the idea of a German military was "enough to horrify Europeans, including the vast majority of the German people themselves."^6 However, the idea of German defense was gaining steam. John J. McCloy, US High Commissioner in Germany declared in July of 1950 that it would be difficult to refuse the Germans the right to defend her territory. In August of that same year, Winston Churchill called for the creation of a European army that would include Germany, much along the same lines as Adenauer had proposed. With the specter of the Korean War, it would be necessary for European leaders to confront the issue and develop a realistic plan. Time was not something they had a lot of: according to Adenauer, "What is happening [in Korea] is a dress-rehearsal for what [Stalin has] in store for us here."^7 The perception that the Soviet threat was real was essential in maintaining the support for this new plan. While it strengthened Kennan's theory about Soviet expansionism, it helped polarize public opinion and focus on the need for collective defense. Unfortunately, this focus would get lost as the debate would progress, and the decision to re-arm _ _ ^5 Monnet, p. 337. ^6 Monnet, p. 337. ^7 Monnet, p. 338. 44 Germany, regardless of the specifics, took on an entirely different argument. From the beginning, the EDC represented nothing but trouble for Europe. Whereas Monnet, Reuter, Schuman, Adenauer et al. had the gift of time to draft the ECSC details, the EDC was born under time constraints. This lack of time forced the group to move ahead without the proper consensus, which would ultimately doom the project. As a compromise and a shortcut to expedite planning, the ECSC infrastructure was chosen as a model for the EDC. The influence of the ECSC is not hard to establish: in Rene ' Pleven's announcement of the proposal for the EDC (it would later be known as the "Pleven Plan"), he made repeated reference to the ECSC and the model of cooperation established within the ECSC.^8 The justification for this was that the ECSC had been proven a successful international effort. What the EDC's creators failed to address was the inherent difference between a military organization and an economic organization. The failure to recognize differences in the purpose of the organizations was not the only problem the EDC's creators faced. It was increasingly impossible to agree on what the EDC would do. To make matters worse, an _ad hoc_ committee was created by the Council of Ministers to create a European Political Community (EPC), a body that would oversee the ECSC and the EDC. It was felt that this was necessary so that the EDC could be adequately used as a branch of a cohesive European foreign policy. There _ _ ^8 Patijn, p. 83. 45 was so much confusion as to what the EPC's goals were that when it came time to support the project, no one could agree what they were voting on. The German Socialists did not attend because they saw the EPC as a French conspiracy to keep Germany unarmed; some of the French felt that the community was simply leading them to German control over Europe. The EPC was sent to the Council of Ministers, but it was soon discovered that there was a large flaw: the EDC didn't exist.^9 In the end, a "unanimous" vote of the _ad hoc_ committee was sent to the Council of Ministers, but 37 of the 87 delegates refused to participate in the voting with 50 voting in favor. The EPC was short-lived: when the EDC failed, the premise for the EPC was severely truncated. _M__ONNET VS. DE GAULLE_ It is necessary here to assess the confusion in Europe over the role of the EDC. Two men who were diametrically opposed on the subject were Charles de Gaulle and Jean Monnet. The debate between them is easily representative of the larger battle that was going on between the European federalists and the nationalists. De Gaulle was highly critical of the EDC because of its flawed mandate: if it was to be a true military organization, it would need not only a high command to give orders, but it would need a body politic to dictate what policy it would be enforcing. _ _ ^9 Schmitt, p. 213. 46 Contrary to popular belief, de Gaulle was not staunchly anti- federalist. Several times he had expressed a desire to work towards a united Europe, but his reputation was derived from his strong disagreements on how such a Europe was to be achieved. The difference between de Gaulle and Monnet came down to a matter of ideology: Monnet saw "Europe" as a federal entity first and segments of a united Europe as secondary. Everything Monnet had done, up to the EDC, represented temporary entities; according to de Gaulle, without a federal body, any attempts at cooperation would be isolated and impossible to coordinate. To an extent, history has proven him right. Until the creation of the EEC, multiple attempts at coordination of various pan-European efforts were unsuccessful. Monnet felt strongly that "Europe" as he envisioned it - a true United States of Europe - was possible only if it was done methodically, one organization at a time as circumstances warranted it. The ECSC, Euratom and EDC all fall into this category. Where they differed the sharpest on the EDC was how to control it. Monnet did not distinguish between the EDC and the ECSC whereas de Gaulle correctly saw that a military unit is an instrument of policy; as such, a military needs to have one clear leader who has the power to direct military actions. In effect, de Gaulle was arguing that there was no Commander in Chief. Without him, utilization of the military would be impossible. Since no federal authority existed in Europe, direction of the EDC would be by agreement of the participating countries. It is 47 not hard to see why this would be difficult if not impossible. For the U.S.' part in this debate, it is difficult to establish which, if any, position the U.S. endorsed. It is safe to assume, based on statements made with regard to the path towards integration, that the U.S. tacitly endorsed the Monnet conception of a united Europe. Perhaps influenced by a certain realism, many policy makers agreed that de Gaulle's vision was too difficult to implement and therefore that Monnet's was the vision that would be followed. _B__ACK TO BASICS_ Ultimately, however, the debate reverted to its most fundamental premise: whether or not Germany should be armed. The treaty that would formally create the EDC was presented to the French Assemble ' e Nationale on January 29, 1953. While the other five countries^10 were not 100% behind the EDC concept, it became clear that "the ultimate fate of EDC would be decided by the French parliament."^11 The Bundestag approved the treaty on March 14, 1953 and became the first country to formally endorse the treaty. For the first time since the diplomatic pressure used at the Paris Conference prior to the European Recovery Plan, the U.S. administration began to apply pressure to the countries in Europe. The EDC had become central to U.S. policy towards _ _ ^10 Germany, the U.K., Benelux. ^11 van der Beugel, p. 287. 48 Europe, although the reasons for this are not immediately clear. The EDC, for the Americans, represented a means to an end, and they were not afraid to demonstrate their support of the plan. Military aid within the context of the Mutual Security Program of 1953-1954 became contingent on the creation of the EDC - if it was not ratified, 50% of this aid would not be offered.^12 Apparently the U.S. felt that such a dramatic gesture would underscore the seriousness with which the U.S. viewed the EDC proposal. CIA Director Allan Dulles went public with his concerns, stating in Paris at a meeting of the North Atlantic Council on December 14-16, 1953: If ... the European Defense Community should not become effective; if France and Germany remain apart, so that they would again be potential enemies, then indeed there would be grave doubt whether continental Europe could be made a place of safety. ...It may never again be possible for integration to occur in freedom, although it might be that Western Europe would be unified, as East Europe has been unified, in defeat and servitude.^13 This statement was subsequently endorsed by President Eisenhower, which indicated the shift in U.S. Policy. Whereas, previously, the U.S. had been primarily interested in rearming Germany, the issue had suddenly been raised to a higher level. No longer was it a simple issue of one country's ability to defend herself, now the EDC represented for the Eisenhower administration the very essence of the Cold War: would the aged countries of Western _ _ ^12 _Congressional Record_, 83rd Congr., 1st. sess., p. 8683. ^13 as cited in _The New York Times_, December 15, 1953. 49 Europe accept the new rules under the Cold War and bury the hatchet, or would they continue to live out old rivalries that would ultimately keep them divided and vulnerable? Unfortunately, many realized that French ratification of the EDC would be difficult at the very least. Monnet recognized the difficulty of presenting such an emotionally charged issue to the French parliament and understood that there was no "good" time for presenting it, but, ultimately, the moment chosen was disastrous. The French were caught up with their own war in Indochina and were "temporarily unable to look clearly at their future."^14 Further, Monnet felt that "we were heading rapidly towards an accident." The French, as expected, rejected the EDC treaty on August 30, 1954. Four years of effort and progress had been lost, and some ventured to say that the failure of the EDC had killed Europe. Such claims were premature, however, the impact of this failure was nonetheless significant. The enthusiasm for a single "Europe" had not been killed, but it is safe to say that those who shared this enthusiasm were now tempered with a dose of reality that highlighted exactly what their limits were. In retrospect, it is easy to say that the death of Europe as an idea was hasty...we now know the success that Europe would enjoy only a few short years later with the creation of the EEC. However, the failure remains as a testament to the fact that diplomacy and common sense are not always the only factors that go into policy- _ _ ^14 Monnet, p. 397. 50 making. There is another failure to consider: the failure of the United States to influence France and the other countries to ratify the EDC. While it took some time to establish the EDC as a cornerstone of U.S. policy, it eventually became the _de facto_ foundation for American actions towards European integration for two years. As was demonstrated, pressure was applied to France to ratify a treaty that would seemingly benefit all involved. So why did it not work? It is safe to say that the U.S. could not have done more to move the process along and probably could not have altered the French opinion anymore than it already had. Nothing short of convincing the French that by creating the EDC they would not be creating a German army would have helped; as has been mentioned, Monnet often points to the psychological impact of deeply held beliefs that may or may not have anything to do with the reality. The reality here was that the French unwittingly forced the Germans to create their own military instead of creating a military unit that would be partially controlled by the French.^15 While the shortsightedness of the French is easy to assess forty years later, at the time it was more understandable. They _ _ ^15 As Monnet explains: "The negative vote...put the clock back...to that same season in 1950 when the re- establishment of a German army had seemed inevitable. ...Resultant agreements made it possible for Germany to join a traditional military alliance between national armies financed by national budgets and run by national Commands." (pp. 397-398) 51 were being asked to allow a former enemy to rearm, not even ten years after said enemy had controlled a large portion of their land and who was responsible for the deaths of thousands of its citizens. This was an enormous burden on the French at the time and, in these circumstances, it is not hard to understand why they were wary of approving the EDC. _I__MPACT OF EDC FAILURE_ The lessons the U.S. would learn from this failure would prove important in future dealings with Europe. The primary problem that the U.S. and EDC supporters had was making clear to the French exactly what they were voting on. The French could not see that the EDC was creating a _German_ division of a _European_ army; to them, giving any Germans weapons was tantamount to independently rearming Germany. Never mind that the Germans would be under partial French control (before the ratification vote, it was agreed that a multi-national panel would command the EDC) - the French had lost sight of the important distinction in the treaty. This inability to clarify the issue became the focus of most countries who had supported the EDC. The fact that the EDC treaty was a compromise treaty and therefore somewhat vague became its own worst enemy: by failing to clearly define its role and purpose its supporters had a difficult time winning votes. The U.S. was forced to reanalyze its tactics in dealing with Europe: this was the first case where the U.S. disagreed 52 significantly with one of the European countries, and it saw that it was not completely capable of positively affecting European integration. In conclusion, the United States suffered its first loss in trying to influence European events. The change in its approach to dealing with Europe and future events on the path to European union can be seen quite clearly in the next chapter, when the U.S. was forced to deal with two competing European economic organizations, the European Economic Community and the European Free Trade Association. 53 CHAPTER 5: The European Economic Community and The European Free Trade Association The years following the defeat of the EDC were not easy ones. The feeling in Europe among the federalists was that they had lost the momentum that was essential to moving ahead; conversely, opponents of a federal Europe felt vindicated by the French vote and believed that they had won an important battle. Echoing comments made by Dulles prior to the French vote on the EDC, Paul-Henri Spaak wrote in _The Atlantic_: The failure of the EDC was a terrible blow to the idea of European integration. ... It was a blow to the whole European idea, and at that moment it was a question as to whether the efforts in this direction ... would not be halted once and for all.^1 To their credit, however, many throughout the Six recognized that one defeat could not spell disaster for them. To quote Jean Monnet, "The only true defeats are those that one accepts." So, despite hesitation on the part of some and uncertainty on the part of others, the "Europeans" forged ahead. Nowhere was this attitude more evident than in the Messina Conference held in Messina, Italy. Without a doubt, the EDC disaster taught those _ _ ^1 Paul-Henri Spaak, "The New Europe," _The Atlantic_ _Monthly_. (September 1958), p. 39. 54 involved some valuable lessons. The language in the resolution adopted by the Foreign Ministers at the Messina Conference indicates the shift in emphasis for the builders of Europe: The Governments of the Federal German Republic, Belgium, France, Luxembourg and the Netherlands believe that the time has come to make a fresh advance towards the building of Europe. They are of the opinion that this must be achieved, first of all, in the economic field.^2 This statement is significant for several reasons. First, the realization that the "economic field" was essential to a united Europe indicated a tacit acceptance that efforts to create the EDC and EPC had been misguided. At least implicitly, the foreign ministers seemed to be agreeing with de Gaulle's view that such entities as a military were impossible without a strong central government. Secondly, the resolution was as important for who signed it as well as for who did not. Notably absent from the conference was the United Kingdom, a country that, to this point, had been very supportive of efforts emanating from the continent. _W__ESTERN EUROPEAN UNION_ Immediately following the defeat of the EDC proposal, the countries involved in the EDC attempt passed what is known as the Western European Union (WEU). The WEU was little more than a stop-gap measure that addressed the problem of lost momentum and reassured some in Europe that future cooperation was still possible. The nature of the WEU was somewhat unique: rather than _ _ ^2 Patijn, p. 101. 55 a formal agreement, it was actually a series of amendments to treaties already in existence, primarily with respect to the status of Germany and NATO. These amendments effectively consolidated past alliances and centralized some authority, although neither side of the issue was content. As Hans Schmitt recalls: The disappointment over the EDC disaster did not allow Europeans to wax enthusiastic over the WEU while the opponents of the former viewed it with equal suspicion. Admittedly, the former had less reason to cheer than the latter.^3 Possibly most important was that Germany was finally granted the authority to rearm herself, albeit with strict limitations on Germany's ability to unilaterally use the newly-created divisions. Paris objected, initially vetoing the treaty. The British Foreign Office, architect of the WEU, held its position, however, indicating that her continental activities (notably her military presence in Germany) were contingent on all countries ratifying the WEU agreement. Pierre Mende ` s-France shouldered much of the pressure and relented; the Assemble ' e Nationale caved in and ratified the agreement on December 29, 1954. More important than what it allowed for, the WEU is important for what it did not do. Its military aspect highlighted what the EDC could have done (true supranational activity with each country in effect surrendering its troops to a European authority) and showed that the WEU was, vis-a ` -vis the _ _ ^3 Schmitt, p. 226. 56 military agreement, little more than an extension of NATO. In effect, the WEU disappointed the pan-Europeanists because it did not do nearly enough, while the isolationists were angry because it went far beyond the traditional limits of a simple alliance.^4 The fact that it was able to evolve at all was largely thanks to the intense pressure put on the French by the English who felt that the German issue was too important to ignore any longer. However, in the end, the WEU indicated that all hope was not lost, and, in all likelihood, its quick ratification (a matter of months) signified that future cooperation would be possible. _T__HE MESSINA CONFERENCE_ The six signatories of the ECSC met in Messina, Sicily to discuss what the future held in store for them. Two agreements arose out of this meeting: the establishment of Euratom, which has already been discussed, and the foundation for the European Economic Community (EEC). The United States had been devastated by the failure of the EDC. Allan Dulles continued to be sold on the idea of supranationality: in a memo to British delegate Sir Anthony Eden in September of 1954, he expressed strong criticism of the WEU treaty because of its lack of any allowance for supranational bodies.^5 However, successful foreign policy cannot be based on failures; concentration on successes and/or potential successes _ _ ^4 Schmitt, p. 227. ^5 van der Beugel, p. 308. 57 is the only way to insure continued progress. Dulles was astute enough to realize this and, with the emergence of Euratom and the EEC, recognized that he had two areas on which he could focus in the hope of pushing Europe towards the U.S. goal of a united Europe. The EDC failure had prompted a shift in approach to dealing with Europe, however it did not change the overall strategy: a united Europe remained the goal of the United States. How the U.S. encouraged these goals is explored below, with a concentration on the difference between pre-EDC and post-EDC tactics. This study is primarily concerned with the issue of causality between American foreign policy and European integration. Van der Beugel suggested that prior to the announcement of the ECSC, American foreign policy had been causal, or, at least an important causal factor. While this may have been the case, the effectiveness of U.S. policy following the ECSC had plummeted as evidenced by the failure of the EDC. The U.S. had used what clout it had to pressure Europe into accepting an agreement that Europe did not feel it was ready for, and it did not work. Neither public posturing through official statements nor financial incentives (the linking of military aid to the creation of the EDC) were enough to sway the French; this suggests two possibilities. Either the U.S. was not in a position to affect the proceedings one way or another or the Eisenhower administration had simply chosen the wrong tactics. In all likelihood, the answer lies somewhere between the two, 58 with an understanding that complete causality between the U.S. and Europe had vanished. The Messina conference takes the idea of causality (or lack thereof) one step further: yet again, the Europeans were suggesting what they should do and Americans had little, if anything to do with the original idea. There is no doubt that the United States continued to be the model for Jean Monnet and his disciples; in most correspondence to friends and colleagues, Monnet continually referred to his goal as a "United States of Europe". Nevertheless, there was, among Europeans and Americans alike, a feeling that the undue pressure by Dulles and Eisenhower in the EDC crisis had adversely affected the outcome. Interestingly enough, American policy makers (Dulles included) continued to fail to see economics as the motivating factor behind many of the European initiatives. This continuation came about because the Cold War forced Eisenhower, Dulles, et. al. to interpret most major events (especially those in Europe) in a political/military context. The immediate threat of the Soviet Union in Europe was less economic and more overtly political. As a result, Eisenhower would treat economics as a secondary consideration in foreign policy. In their resolution, the foreign ministers present at the Messina Conference made it blatantly obvious that their goal was economic in nature; political motives were secondary. The document which specifically outlined these goals and detailed the agreements set forth at the Messina Conference was the Treaty of 59 Rome. Notwithstanding this treaty, the Eisenhower administration and Congress continued to treat developments in Europe as primarily political. This was not inherently damaging to U.S. goals, however. As was demonstrated with the Marshall Plan, consensus in Congress was not necessary for support; whatever the reason, support was support. This became evident to the Americans, and the Eisenhower administration shifted to "support and help for what now was considered primarily a European initiative."^6 U.S. tactics towards Europe had changed once again; while activity was not necessarily "hands-off", it did have an air of indirect involvement. Max Beloff thought that there was a real desire "to avoid the appearance of any undue interest when things in Europe began to go ahead again with the Messina Conference of June 1955."^7 There appear to have been several reasons behind the U.S. attitude: obviously, the experience of the EDC was still fresh in their minds and, with that, the desire to avoid a similar debacle. Secondly, this was, after all, a European initiative and, as such, the Americans could not expect to exert a tremendous amount of influence on the process, lest they be accused of infringing on the Europeans' sovereignty. When combined, both factors point to an obvious desire by the administration to avoid the appearance of taking too great an interest in what went on outside the U.S.' borders. _ _ ^6 van der Beugel, p. 308. ^7 van der Beugel, p. 309. 60 The contrast with the ambiguity and broad scope of the Vandenberg resolution and the NATO agreement is striking; the U.S. had learned that it had perhaps overstepped its bounds and was now taking care to stay within its limits (self-imposed or otherwise). The issue of economics, which was raised earlier, calls to mind a few seemingly paradoxical circumstances, but reinforces the idea that economics were not a primary factor in U.S. policy. First of all, as the Messina agreement progressed and spurred some real economic activity in Europe, the U.S. economic situation grew noticeably dimmer. At the time, the economy in the U.S. was in a modest recession. After nominal trade surpluses in 1956 and 1957, the U.S. ran consecutive trade deficits in 1958, 1959 and 1960. In addition, the composite of 11 leading indicators declined for 14 out of 15 months from December of 1956 to Marc