Memorandum by Tommy Woods, Department of External Affairs
'M. Schuman's Proposals for a Franco-German Steel and Coal Commission'

M. Schuman's proposals, if implemented, would involve the setting up for the French and German coal and steel industries of an Authority something of the kind of the International Ruhr Authority. The difference would be (and this would make it attractive to Germany) that this new body would have authority over both France and Germany and both countries would be represented on it. The representatives on the Board would be Government representatives and not the nominees of industry. There would also be a United Nations representative to see that the board 'played fair'. Other countries could join the new organisation but they would have to submit their coal and steel industries to its authority.

The most obvious suggestion aroused by the proposal is that of cartels. Both the steel and coal industries in Europe are, of course, heavily cartelised. The German Steel firms have, apparently got back on their feet or, rather, maintained their position quite surprisingly. The Vereinigte Stahlwerke, which before the war had a capital of 462,000,000 marks, has today, despite war damage and dismantling (estimated at 80%) a capital of 575,000,000 marks. There have been reports recently that the German steel firms have been re-establishing their former contacts, particularly with France and that discussions have been going on with the Comité des Forges and also with the British Iron and Steel Federation (which is, of course, still hoping to avoid nationalisation) regarding the re-establishment of the pre-war international cartel.

Another factor of interest is the apparent future of the steel and coal industries in Europe. The steel industry has recovered very rapidly and production is increasing both in Eastern and Western Europe. The Economic Commission for Europe some time ago calculated that by 1953 Europe could in optimum conditions expect to find a market (both domestically and for export) for 62 million metric tons of basic steel products but that on the other hand the estimated production of steel in Europe in that year would be 70 million metric tons i.e. that 8 million tons would be surplus and undisposable. The prospects for coal are not so difficult but there has undoubtedly been some shift away from the use of coal in industry, influenced largely by the dual pricing methods of the exporting countries and also, of course, by the considerable investment in the oil refining industry which is going on in Europe. The ECE in a recent study of the European coal industry has suggested that the industry may be faced with a relative decline in the future. There is at present a surplus of three million tons of exportable coal in the coal-producing centres of Europe which cannot be disposed of. Though this is to some degree, at least, a seasonal surplus it suggests possible difficulties.

Clearly, therefore, an international cartel might in these circumstances have as its aims the restricting of output and the maintenance of high prices. M. Schuman has, however, specifically disclaimed any connexion of the new body with cartels and an inter-governmental body should operate in a manner calculated to further the economic interests of Europe as a whole, rather than in the interests merely of the industrialists themselves. In fact, the existence of such a body, particularly if it were to become more international, might well act as a brake on the return to the restrictive practices of pre-war cartels. Furthermore, the question of dual pricing might be more satisfactorily handled. German coal and steel and French steel have, of course, in the past been subject to dual pricing.

An important factor is the British attitude which seems to be, as usual in matters of this kind, negative. No doubt, the British do not wish to associate their nationalised coal industry or their about-to-be-nationalised steel industry to the contagion of association with private enterprises. The existence of such a body however representing the Western European coal and steel industries, if it functioned efficiently, could well in the circumstances of the possible surpluses of both commodities have an effect on British industry and would, in particular, probably make the British reconsider some of their trading policies, such as dual pricing.