THE SCHUMAN PLAN

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP78-01617A002400050001-9
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 14
• Document Creation Date: December 23, 2016
• Document Release Date: May 21, 2013
• Sequence Number: 1
• Publication Date: September 1, 1950
• Content Type: REPORT

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CONTENTS
HIGHLIGHTS
THE SCHUMAN PLAN
FAR EASTERN STRUGGLE
Soviet Moves 4
North Korean Resistance 5
Indochinese Threat 5
CRITICAL TRADE PROBLEMS
Spanish Pyrites. 6
Satellite Arms Traffic 7
Metals to USSR 7
Czech-Swedish Trade.
LOCAL DEVELOPMENTS
British Labor Policy 9
Kashmir Stalemate 10
Yugoslav-Western Relations 11
East German Alert Police 11
Document No. Oa
NO CHANGE in Class. 0
DECLASSIFIED
ass. CHANGED TO: TS
DDA Memo, 4 Apr 77
Auth: DD G. 77 :37y6:30245,____.
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HIGHLIGHTS
Soviet Delegate Maliles?last days as President of the
UN Security Council were marked by the introduction of
Chinese. Communist charges of US aggression against Taiwan
and accusations that the US has violated Chinese Communist
territory. Falling into the now familiar pattern of the Soviet
political and diplomatic offensive against US policy in the Fat
East, these latest moves provide few definite clues regarding
future Soviet and Chinese Communist actions in the Far East
and could be preparations for decisions either for or against
.the use of Chinese Communist troops in Korea, the invasion
of Taiwan, or a final settlement in Korea (see page 4).
As Western Europeans continued to discuss ways and
means of accelerating their defensive preparations, the
Schuman Plan will face its most Crucial test when negotia-
tions resume on 10 September. Schuman's original concept
of a truly supranational organization is meeting with growing
opposition on political as well as economic grounds and a
considerably weakened final draft is likely to emerge (see
Page 2).
. The USSR and its Satellites are still having cons:
siderable success in their efforts to purchase scarce stra-
tegic materials from Western: sources. The Spanish Govern-
ment has agreed to export large quantities of pyrites to
countries within the St:Met orbit (see page 6); Western
molybdenum and cobalt are being transshipped to Eastern.
Europe (see page 7)! and the Communist countries of Europe
are still conducting a lively traffic in arms and munitions
(see page 7).
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THE SCHUMAN PLAN
Crucial Test With negotiations on the Schuman Plan
scheduled to resume on 10 September,
Schuman's original proposal for a truly supranational
organization faces its most crucial test, and a considerably
weakened final draft is likely to emerge. Opposition to the
plan as first conceived appears to be growing 'on political
as well as econothic grounds, the Korean War has raised
new problems, and various factors are contributing to French
willingness to accept compromises.
Weakened Power The tentative agreement to establish a
Council of Ministers composed of
representatives of the member governments represents the
gravest potential weakening of the power of the pool's High
Authority and may seriously impair the supranational
character of the proposed organization. Although the exact
relationship of the Council to the High Authority is yet to be
defined, the vital role of coal and steel in the stepped-up
defense program and the widespread reluctance to' avoid
dislocations in the various national economies will be in-
fluences in the CouncUfs favor in its struggle for power With
the more international-minded High Authority.
Economic Impetus Meanwhile, the Korean war and the
resulting increase in defense prepar-
ations have greatly increased the European coal
and steel and thus reduced the immediate economic impetus
toward the Schuman Plan, especially among the Germans.
Coincidentally, the political factors behind the original
Schuman proposal .may become less urgent as a result of the
Korean war. Schuman, believing that his objective of curbing
German aggression may now be achieved through an integrated
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110CRIMISIEtatantgol
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defense establishment, may become less insistent in his
demands for a truly supranational High Authority.
Task Ahead The most difficult portion of the negotiators'
task still lies ahead, and the French continue
to show concern over the problem of finding some basis for
British participation. Controversy will be particularly intense
over such issues as the precise machinery for electing key
officials, the method for determining prices and wages, and
defining clearly the relationship between the High Authority
and the Council of Ministers. The British can be expected to
continue their efforts so to soften the supranational aspects
of the organization as to permit them eventually to participate.
Confronted with these problems and pressures, the French
may be willing to accept further compromises in order to
avoid the loss of prestige which would follow complete failure
of the plan and to insure its passage at an early date by the
various national assemblies.
Probable Outcome Aside from the growing likelihood that
the Schuman Plan will not, as originally
'planned, "abnegate sovereignty in a limited but decisive field,"
there are some indications that the final draft may not prevent
regional producers' associations from indulging in "cartel"
practices. Even a watered-down plan would produce important
economic results of advantage in defense efforts, particularly
in the fields of investment planning, coordinated production
and distribution, and price control. However, substantial
departures from the original concept would: (1) be a psycho-
logical blow to the European unification movement and to the
emerging faith of Western Europeans in their potential as
a single force; and (2) jeopardize this unique opportunity for
a full integration of two of Europe's basic industries.
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FAR EASTERN STRUGGLE
Soviet Moves The latest propaganda and diplomatic moves
? by the USSR and Communist China involving
the Far East are further tactical developments in the continu-
ing Soviet offensive in the United .Nations. Chinese Communist
:charges before the UN of US aggression against Taiwan and
? accusations that the US has violated Chinese Communist terri-
tory fall into the now familiar pattern of the Soviet canipaign
to picture the up as the aggressor in Korea and other areas
of the Far East, to divide the Western Powers on the con-
troversial questions of Taiwan and Chinese representation in
the UN, and to confuse UN discussion of the Korean situation.
.These latest moves offer few definite clues regarding.
future Soviet and Chinese Communist moves in the Far East ?
and could be designed to pave the way for a number of widely
varying Soviet actions. For example, charges that the US has
violated Chinese territory in themselves are Inconclusive: they
may be designed merely to maintain the Initiative in the SC and
to promote Western fears of Chinese Communist intervention
in Korea in an attempt to improve the Soviet bargaining position
.in any negotiations for a Korean solution. On. the other hand,
these accusations may actually be the propaganda build-up
for Chinese Communist military aggression in Korea or else-
where. Similarly, airing the Taiwan issue in the SC does not
rule out an invasion of Taiwan, inasmuch .as.branding the US as
the aggressor might later serve as justification for an attack.
. Turning the issue over to the UN, however, could serve as an
excuse for the present.lailure to fulfill the pledge id "liberate"
Taiwan. Finally, both moves may be further preparations for
a later Soviet attempt to trade a North Korean withdrawal. to
the 38th Parallel for some concessions on Taiwan and seating
the Chinese Communists in the UN.
4
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Korean Military North Koreans reportedly are already
preparing defensive positiOns and
troops for the time when UN forces go over to the offensive.
Entrenchments, pill boxes, and artillery positions were being
constructed in the city of Seoul as early as 5 August, and civilians
were ordered to evacuate districts bordering on the Han River.
Reports also indicate defensive preparations in the Kunsan and
Inchon regions on the west coast and around Ulchin on the east
coast. Although North Korean rear-area and security forces
have been kept to a minimum by the necessity of committing
them to the battle line in order to maintain the initiative, possibly
20,000 are believed to be deployed in the rear, both in the south-
west and in the Seoul-Inchon region. The training status of these
troops is unknown, but a concentrated training program for con-
? scripts is reportedly in progress.
Indochina Rebels Ho Chi. Minh's attempts to extend his con- ?
trol over rebel forces in Laos and Cambodia
will multiply the military difficulties of the French forces and
? their native allies. Control over Lao and Cambodian rebel
groups would increase Viet Minh capabilities for any of several
courses of action; (1) diversionary feints against or harassment
of French positions in Laos and Cambodia; (2) preparations for
a "defense in depth" against Wench forces concentrated in
Vietnam; or (3) preparations for a long-term offensive in the
highlands of Laos. Intensified rebel activity, with a marked im-
provement in guerrilla tactics, reflects the peniatratioft:thus-fal-by
Viet Minh groups, who infiltrate these areas disguised as Lao
and Cambodian natives. Viet Minh influence has been especially
notable in Laos, where there are also reports of Chinese Com-
munist advisers in the camp of the Lao rebel, Prince Souphanavong.
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CRITICAL TRADE PROBLEMS
Spanish Pyrites The Spanish Government has recently
agreed to export to countries within
the Soviet orbit large quantities of pyrites, an important
strategic commodity. Pyrites, which are particularly im-
portant as a source of sulphur in the manufacture of sul-
phuric acid and which contain valuable quantities of iron
and copper, have been intensively sought by the Cominform
countries since Yugoslavia banned pyrites exports to Soviet
countries early in 1949. Coupled with this ban has been
the demand, almost confiscatory in nature, which the USSR
has been making upon East Germany and Czechoslovakia.-
for sulphur and its products.
In an effort to take advantage of this situation and
others similar to it, the Spanish Government recently estab-
lished a state-controlled export company which has a mono-
poly over trade with Cominform countries. This company
has recently completed deals through agents in Switzerland
? and Sweden by which pyrites from the Rio Tinto mines in
SPain will be sent in the quantities of 100,000 tons to East
Germany and 6,000 tons to Poland. (The pyrites to be sent
to East Germany could produce 150,000 tons of pure sul-
phuric acid or 245,000 tons of smokeless powder.) Through
an earlier deal, Czechoslovakia is to receive an unspecified
amount of Rio Tinto pyrites.
Although the Rio Tinto mines, largest pyrites mines
in the world, are British-owned, under present Spanish
Government controls over private business and all exports,
the owners cannot be considered responsible for these re-
cent deals. British ownership does, however, have economic
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and strategic implications for the US. US resources of
sulphur are vanishing so rapidly that a decision was made
in June to reduce sulphur exports by at least 30 percent. .
British sulphur-consuming industries, which have been
importing US sulphurrwith ECA funds and which will be
affected by the June cut, could turn to Spanish pyrites for
sulphur. If the British were successful in getting sizeable
shipments from the Rio Tinto mines, the flow of this strategic
item to the Soviet orbit would be reduced and British pressure
for US sulphur would be lessened.
Arms Traffic A by-product of World War II and the cold
war has been the emergence of the Com-
munist countries of Europe as the principal traffickers in
weapons. Insufficient capacity in France, embargoes by
.Switzerland and Sweden on most weapons, peace treaty pro-
hibitions in Germany and Italy, and strict regulations by the
US and UK have left Soviet orbit sources, particularly Czecho-
slovakia, the only producers willing to sell armaments on
reasonable terms to all corners with no questions asked.
World War II stocks of arms have been plentiful and Czecho-
slovakia and the other Satellites have been producing arms
of improved quality and at a higher rate. The arms are being
sold as a means not only of fomenting political unrest but of
obtaining readily convertible foreign exchange. Principal
buyers have been dissident groups or small undeveloped
countries, including Ethiopia, Israel, Venezuela, and Ecuador.
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STAT
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Czech-Swedish Trade Shipments of ferro-alloys to Czecho-
slovakia have been suspended by
Sweden following Czechoslovak failure to import the amount
of nonessential goods scheduled under the 1950 trade agree-
ment. Sweden was to deliver 50 tons of ferro-vanadium, 400
tons of ferro-tungsten, 280 tons of ferro-chromium, and 120
tons of ferro-silicon, all of vital importance to the Czech iron
and steel industry. The Swedish action is similar to that which
occurred bi the fall of 1949 when shipments of high grade iron
ore were halted temporarily until the Czechs increased non-
essential imports. Czechoslovakia undoubtedly will once a ;Pin
increase nonessential imports because the Czech iron and steel
? industry must have a constant supply of Swedish ferro-alloys.
8
STAT
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? LOCAL DEVELOPMENTS
UNITED KINGDOM
Labor Party Policy The recently published annual Labor
. Party pone), statement emphasizes the
Party's support for the US and the Wester? defense effort, While
? simultaneously revealing i marke&retreat.from..the doctrinaire
.Socialism preached in. the early postwar period. The statement's
approach to domestic economic issues reflects a greater flexi-
bility and pragmatism and fails te reaffirm the PartY.7'd earlier:
Intention to nationalize the sugar and cement industries or tO
's'inutualize" life insurance. The solidity of the Party leader-
ship's support for Allied policies is revealed by number of
favorable references to the US, the call for a strong defensive
.structure even at the cost of standards of living and tax relief,
and the proposal for a'"world plan for mutual aid." Apparently
an echo of the Point IV. Program and a .calling for an amalgt,?
mation of existing UK, US, and UN programs for economic aid
and technical assistance, the proposal reflects Labor's view
that.backward areas can best be made immune to Communism
through economic improvement fostered by the Western Powers.
It may- also have been made at this time in an attempt to over-
come charges of isolationism which grow out of Britaids
stand on European integration. The statement Will almost
certainly be approved at the forthcoming national party conven- ?
tion.
9
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SOUTH ASIA
Kashmir Stalemate The failure of the efforts of UN Mediator
? Sir Owen Dixon to effect a solution of the
Kashmir dispute suggests that the present stalemate will con-
tinue indefinitely unless overwhelming opposition to Indian Prime
Minister Nehru 's stand somehow develops within the Indian
Cabinet or unless Pakistan eventually loses patience and resorts
to force. Sir Owen's attempts to work out a compromise have at
least brought out into the open the idea of partition plus a limited
plebiscite. Pakistan, recognizing that the once agreed-upon over-
all vote is virtually unobtainable, now appears prepared to com-
promise on the control of certain districts if assured that the
Inhabitants of the all-important (and now Indian-held) Vale will
be able to register their preferences without outside influence or
compulsion. At the same time, however, Sir Owen's efforts have
demonstrated that Nehru, despite the deceptively fair words he has
often used, is still unwilling to bargain in good faith. Inasmuch
as the UN Security Council is unlikely to bring any effective pres-
sure to bear on India at this time, any peaceful resolution of the
present impasse would appear to rest on the slim hope that Nehru's
colleagues will eventually prevail upon him to make a genuine
effort to reach a compromise solution. Various members of the ?
Indian Cabinet appear to be eager to throw off the heavy economic
burden which the Kashmir stalemate is imposing on India, some
reportedly even to the extent of being willing to give up the Vale
without a plebiscite if some way can be found to appease Sheikh
Abdulla.
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YUGOSLAVIA
Western Relations Yugoslavia's relations with Italy ? -
and Austria have shown definite im-
provement during recent weeks, despite continued strain
with its other pro-Western neighbor, Greece. The friendlier
atmosphere between Yugoslavia and Italy derives from the
dormancy of the Trieste issue, the easing of traffic restric-
tions between the Allied and Yugoslav zones of. Trieste, and
the cessation of the Yugoslav practice of requiring Italians
working in Zone A to convert their lira into dinars at a loss.
Moreover, Italians are becoming increasingly aware of the
importance of Yugoslavia to Italian defense plans and will
probably seek even closer relations with the Tito regime.
Regarding Austria, the Yugoslays have ceased pressing their
own claims against the Austrians in the peace treaty negotia-
tions, have sought economic aid from Austria, and have re-
frained from stirring up dissension among the Slovene '
Carinthians. Greek-Yugoslav relations, however, show little
signs of improving despite the desire of both countries for
closer diplomatic and commerbial ties. The principal obstacles
appear to be Tito's continued unwillingness to renounce his
Macedonian aspirations and his failure to return any sizeable
number of the Greek children still in Yugoslavia.
GERMANY
Sovzone Police The East German paramilitary Alert Police
are gradually but steadily being shaped into
an elite military force. All personnel are now well grounded
in combat operations up to company level, and the force is
ready for additional training. The morale of both officers and
"enlisted men is good and security screening has increased
to ALi Efflefly..
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GERMANY
reliability. The system of allocation of weapons to the Alert
Police apparently is designed not to equip the Alert Police
units fully but rather to provide a broad training base so
that personnel may become familiar with all arms likely to
be used in war. (Large-stocks of combat-serviceable weapons
from Soviet Army depots could be issued with little delay if
the need existed.) Major administrative changes to make a
more efficient military organization are likely in the near
future. Whether these changes will be followed by an ex-
pansion of the force is presently not clear. , If an expansion
is desired, however, it is believed that the Alert Police organi-
zation would be capable of absorbing and training large numbers
of recruits and could probably ready a combatTfit force totalling
250,000 in six to eight months.
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DISTRIBUTION
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40 PIMINNIMPINIML
The President
Secretary of State
Secretary of Defense
Secretary of the Army
Secretary of the Navy
Secretary of the Air Force
Special Assistant to the President, W. A. Harriman
Chairman, National Security Resources Board
Executive Secretary to the National Security Council
Assistant Secretary of the Navy for Air
Chairman, Joint Chiefs of Staff
Secretary, Joint Chiefs of Staff
Chief of Staff, US Army
Chief of .Naiiral Operations
Chief of Staff, US Air Force
Assistant Chief of Staff, G-3, Operations, US Army
Deputy Chief of Staff (Operations), US Air Force
Deputy Chief of Naval Operations (Operations)
Director of Plans and Operations, US Air Force
33,34,350 . Special Assistant, Intelligence, Department of State
36,37,38,39,40,41,
42,43,44,45 Assistant Chief of Staff, G-2, Intelligence, US Army
46,47,48,49,50,51,
52,53,54,55,56,
57,58,59,60 Director of Naval Intelligence
61,62,63,64,65,66,
67,68,6a . . Director of Intelligence, Headquaters, US Air Force
70. . . . . . Director of Intelligence, Atomic Energy Commission
71. . . . . . Executive Secretary, Military Liaison Committee,
Atomic Energy Commission
Document No.
NO CHANGE in Class.
DECLASST-FriED
, CTILD TO: 'TS
TY-2A ,,T.c.mo, 4 Apr 77
7M 77/1763
001
0
S C
72,73,74,75,76,77,
78,79,80,81,82,
83,84,85. . Chief, Acquisition and Distribution Div., OCD, State
860 . . . . ? . Chief, Policy Planning Staff, Department of State
87. . . . ? . . US Air Force Representative on Joint Strategic Survey
Committee
88. . . . . . ? . Director, Federal Bureau of Investigation
89. . . . . . . ? Administrator, Economic Cooperations Administration
90 Deputy Director for Intelligence, The Joint Staff
91,92 .. ? Secretary, Joint intelligence Group, Joint Staff
93,94,95. . . . Director, Armed Forces Security Agency
T 0
#0011110111#16111111/P
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