Putting the plan in motion in 51 days .1 Dillon’s feud with the US Treasury

(25 November-6 December 1959)

Dillon started his 51-day saga on the wrong foot. The 24 November memo to the President claimed that the proposal had been approved by Robert Anderson, the powerful Secretary of the Treasury. In fact, Anderson had seen the memorandum only on 25 November and did not like it (CDD, 1959, November 25). During a phone call with Dillon on 30 November, he tore apart the memo, expressing concern about the US becoming a full member of the OEEC, an idea that “would get a very cold reception by Congress”

and questioning whether a revamped OEEC was the right forum for trade (CDD, 1959, November 30). He preferred for the World Bank to handle the aid agenda while the OEEC could be used “to stimulate the participation of European countries for the development of underdeveloped countries”

– as OEEC Secretary-General René Sergent was arguing. Dillon tried to placate Anderson by downplaying his own proposal as “exploratory” and by assuring him that he would hold off on it until Christmas, after President Eisenhower had returned from his “goodwill world tour” scheduled from 3-23 December. “We will have all the time in the world to work out a

definitive thing when he gets back,” Dillon said. Anderson was not reassured and began to lobby against Dillon’s memo (CDD, 1959, November 30).

On 2 December, Anderson produced his own memo to prepare President Eisenhower for his conversations on development aid with European leaders during his world tour (FRUS, 1959, December 2; Kaufman, 1982, p. 184).

His note started from the same underlying economic rationale as Dillon’s memo: the Western European countries now had the means and should spend more on bilateral development aid, building their own domestic institutional frameworks to do so. This would help to bring down the US BoP deficit and to achieve “the Free World’s political objectives in the less developed areas”.

Not surprisingly for a Treasury memo, the discussion focussed mainly on the first point, detailing the international reserves and financial capacity of France, Germany, Italy and the UK. It concluded that Germany and Italy were in a better financial position to increase their aid than the established colonial donors, France and the UK.

The memos of Dillon and Anderson differed in two ways. First, Anderson did not believe that the US needed a new multilateral body to spur European aid (FRUS, 1959, December 2). At the time he was suspicious of this or any other initiative to create new multilateral bodies for two reasons. The first was a public one: such bodies tended to be expensive and thus bad for the US BoP. The second, was a more reserved but not less powerful one: these institutions tended to infringe on domestic power, and he was not willing to sacrifice any of his own prerogatives. Thus, in his view, the US should extract more European aid through bilateral pressure; hence the need for information on the Europeans’ financial situation to cajole them.

Anderson warned Eisenhower against the calls for coordinating Western aid that might come from Italy and Germany, which he portrayed (correctly) as manoeuvres, especially by the former, to avoid undertaking more bilateral responsibilities. Although Anderson did not mention Dillon’s memo, which was already on the President’s desk, his rejection of “coordination” seemed

“friendly fire” against it. The second difference concerned the Western European donors that the US should target. As we saw, Dillon reduced his list to the four main European powers. Anderson agreed that the US should start by putting pressure on these four, but unlike Dillon, his ultimate target group included all European donors. This second difference reflected the different priorities of the Treasury and State Departments. If the goal was to increase non-US foreign expenditure to help bring down the US BoP deficit, the aid effort of every European donor country, however small, was relevant.

If on the contrary, the objective was to (also) address the Soviet challenge, then not all were equally welcome.

The first difference between the two memos reflected Anderson’s desire to keep foreign expenses down but also a reluctance to negotiate US economic policies in multilateral settings. Were Dillon’s proposal to prevail, Anderson would lose room for manoeuvre both with the other OEEC member countries and the State Department, which was bound to run the US mission to the revamped organisation. Paradoxically, he had a better opinion of the OEEC than Dillon and in particular of its new economic policy committee which had taken such a favourable stance towards the US in the BoP deficit saga, as he mentioned in his memo to Eisenhower. Yet echoing the position of the UK and the OEEC Secretariat, Anderson saw no need for the US to join the OEEC; playing a more active role as an “associate” member would suffice. Between the State Department and the Treasury, the President faced a difficult choice.

5.3.2 Dillon’s trip to Europe: (7-14 December)

The British, who had the permanent chair of the OEEC, scheduled their

“ground-breaking” ministerial meeting for December 1959 but were later forced to reschedule it to 14 January 1960 (CDD, 1959, November 20).

Dillon, who had already made his travel arrangements, decided to go ahead with his scheduled trip and use it to gauge the reaction of US allies to his proposal (CDD, 1959, November 17). On 7 December he was off to Europe.

To keep his agreement with Anderson, Dillon was expected to focus on trade and aid, while keeping to himself his concrete proposal of the US joining a new OEEC. Not surprisingly, he had no intention of keeping his promise.

On the contrary he used the trip, which included stops in London, Brussels, Bonn and Paris, to lobby for and refine his vision. As Dillon immediately realised, his European counterparts were obsessed with the Six and Seven imbroglio. They were hardly willing to talk about anything else. This allowed Dillon to concentrate on the trade feud and to talk less on aid, and thus keep the inconsistencies and controversial parts of his aid plan out of sight. At the same time, he took the liberty to float, according to his audience, different versions of his proposal of a “revamped OEEC” as the proper machinery to tackle both issues.

In London, on 8 December, Dillon met twice with Derick Heathcoat-Amory, the Chancellor of the Exchequer, to discuss mainly aid – as in Britain the

Treasury was the leading body on the subject (FRUS, 1959, December 9, 1959, December 9a). Heathcoat-Amory agreed to the idea of a reorganised OEEC with increased US participation (Dillon said nothing about US membership) to put pressure on Germany and coordinate Western aid;

though at a macro policy level, since as Dillon explained, the World Bank would continue to coordinate aid in specific countries and projects through its consortia. Heathcoat-Amory also agreed on “excluding non-industrial OEEC countries” (i.e., developing countries) from the table, but was “concerned about associating Japan with the OEEC group owing to European trade problems with Japan” – a reaction later echoed by the Germans and the French. In London, Dillon also met with Foreign Minister Selwyn Lloyd and Prime Minister Harold Macmillan, both of whom focussed on the Six and Seven imbroglio over which, if not “bridged”, the British feared catastrophic consequences (FRUS, 1959, December 9b). “NATO cannot continue on that basis” expostulated Lloyd during his meeting with Dillon (FRUS, 1959, December 8).

On 10 December, Dillon left for Brussels, where he met Walter Hallstein, the head of the EC (FRUS, 1959, December 10). Regarding aid, Dillon mostly discussed the emerging agenda of “European aid” launched by the group of Six (DDF, 1959, November 21). The next day in Bonn, he met with Chancellor Konrad Adenauer and the main figures of the German government (FRUS, 1959 December 11, December 11a). In contrast with his previous meetings, Dillon focussed more on aid. Adenauer said that Germany was indeed prepared to do more for less-developed countries to counter “the Soviet threat” (FRUS, 1959, December 11). Nevertheless, Finance Minister Franz Etzel claimed that Germany was already doing a lot, with its assistance “approaching one per cent of its gross domestic product (GDP), as compared with only slightly more than one per cent for the United States” (FRUS, 1959, December 11). Days later, at the Western summit, Adenauer would repeat this claim, which was at odds with US assumptions and, as we saw in Chapter 4, with the unpublished OEEC study of 1957 (OECD,1957, December 12; DDF, 1959, December 19-21, p. 764). It suggested that Germany was using a broad and self-serving definition of aid that included flows such as short-term (commercial) loans, export credits and reparation payments. Germany’s “extravagant claim” only reinforced the need for a body to deal with Western aid and to define it more coherently.

Dillon wisely avoided an argument with Etzel and once again withheld the

details of his donor club scheme, pointing simply to a “reorganised OEEC”

as the vehicle for such coordination (FRUS, 1959, December 11).

On the evening of 11 December, Dillon arrived in Paris. On aid, which did not figure much during the conversations, France agreed on the need to increase the German contribution, although it was hesitant on the need for an institutional home for Western aid. In any case, Maurice Couve de Murville, the French foreign minister, warned, such a body should “not engage in detailed planning regarding aid” (FRUS, 1959, December 13b).

Dillon’s multilateral aid plan aimed at competing with the Soviets differed fundamentally from de Gaulle’s approach of collaborating with them.

But given that Dillon, as in his previous meetings, was presenting his aid initiative as part of a “package”, the French were happy to acquiesce in principle, to gain the goodwill of the US side in the other subjects that they found more pressing (the trade and OEEC issues), while at the same time advancing their red line: keeping aid as a French sovereign policy.

Although Dillon spoke little on aid in Paris, it was here, teaming up with his French friends including Monnet, that his plan to create what came to be the OECD and the DAG took definitive shape (DDF, 1959, December 12, December 14; Griffiths, 1997, p. 244). Dillon assured them that the British and his other interlocutors had welcomed the concept of more active US involvement in a “deeply reorganised OEEC”, although he had been giving this formula different meanings in different contexts: from the US being more active as an associated member in a reformed OEEC to joining a completely new organisation as a full member. Although his 24 November plan had been significantly inspired by the Monnet-Tuthill tandem, Dillon was now to find out how exactly the French considered such deep reorganisation of the OEEC, with full US membership, should come about. To cut the links with the past as much as possible, the French insisted that the reorganisation should take place outside the OEEC (even in physical terms) and that it should be carried out by a transitional ad hoc body composed of OEEC countries without the involvement of the OEEC secretariat. The goal, as Couve de Murville put it to Dillon, was that “the OEEC should not transform itself” (FRUS, 1959, December 13b). Furthermore, as the reconstruction of the OEEC would take at least 18 months, and the issues at hand (aid and trade) could not wait, this same ad hoc inter-governmental body should also temporarily deal with them. By creating new machinery (a revamped OEEC) that would take time to set up, the US proposal had overlooked a