CURRENT INTELLIGENCE WEEKLY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A000400010001-8
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 21
• Document Creation Date: December 15, 2016
• Document Release Date: May 17, 2004
• Sequence Number: 1
• Publication Date: October 15, 1954
• Content Type: REPORT

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OCI NO. 0810
15 October 1954
e,P /r~0
CURRENT
INTELLIGENCE
WEEKLY
CENTRAL INTELLIGENCE AGENCY
OFFICE OF CURRENT INTELLIGENCE
CONFIDE
4 3
DOCUM
ErNT N?.
25X1 I INO CHANGE IN CLASS. ^
G UECLASSiFrEL)
CLASS. CHA, Eri TO: T $~
NEXT REVIEW DATE;
AUTH; B70.2
State Dept. review completed DATE' viEwEr3:
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THIS MATERIAL CONTAINS INFORMATION AFFECT-
ING THE NATIONAL DEFENSE OF THE UNITED STATES
WITHIN THE MEANING OF THE ESPIONAGE LAWS,
TITLE 18, USC, SECTIONS 793 AND 794, THE TRANSMIS-
SION OR REVELATION OF WHICH IN ANY MANNER TO
AN UNAUTHORIZED PERSON IS PROHIBITED BY LAW.
The Current Intelligence Weekly has been prepared prima-
rily for the internal use of the Central Intelligence Agency.
It does not represent a complete coverage of all current
situations. Comments and conclusions represent the im-
mediate appraisal of the Office of Current Intelligence.
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SUMMAAY OF CONTENTS
THE SOVIET WORLD . . . . . . . . . . . . ... . . . . Page 4
A discussion of the Sino-Soviet communique of
11 October 1954.
SOVIET POLICY CONTINUES TO ENCOURAGE INDIAN
NEUTRALISM . . . . . . . . . . . . . . . . . . . . Page 6
Current Soviet policy toward India is designed
primarily to encourage India to undertake the role
of moderator and mediator between East and West.
Moscow and Peiping probably hope that this policy--
besides strengthening pro-Soviet attitudes among the
Indians--will result in a cohesive, Indian-led bloc
of states which could act as an obstacle to further
Western defense planning in Asia.
USSR LIQUIDATING GREATER PART OF SOVIET PROPERTY
. . . . . . . . Page 10
The Soviet Union's gradual relinquishing of its
share in joint companies in Eastern Europe and China
is part of a general campaign to enhance the appear-
ance of independence of Soviet bloc members. The
USSR is apparently confident that the Eastern European
Satellites can carry on industrialization programs
without close day-to-day control from Moscow and con-
siders that Soviet long-range economic objectives will
not be sacrificed by the withdrawal of direct business
participation.
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COMMUNIST CHINA MAINTAINING IMPRESSIVE RATE OF
ECONOMIC
GROWTH ? . . ? . . . . .
. . Page 12
Communist China's rapid rate of industrial growth
in the first two years of its first Five-Year Plan sug-
gests that the five-year goal of "more than" doubling
industrial output by 1957 will be achieved. The an-
nounced goal of attaining the 1932 Soviet industrial
level by 1959 is also expected to be reached.
POLITICAL CONDITIONS WORSEN IN HUNGARY
? ? ? . Page 15
The Hungarian regime is faced with a steadily
worsening political situation resulting from failure
to provide firm direction in carrying out the year-
old, revised economic plans. The government's ap-
parent vacillation and a concurrent relaxation of
political controls have encouraged the population
to register open disapproval of present Communist
policies.
SPECIAL ARTICLE. THE STATUS OF EUROPEAN INTEGRATION
FOT.T. TAT _ TH TN
EFEA
France's rejection of EDC was a marked setback
for the concept of rapid European integration through
supranational institutions. There has, however, been
continuing progress toward integration by means of
closer working relationships among almost all Western
European nations. The most recent development along
this line is the London agreement of 3 October to
broaden the powers of the Brussels Treaty Council.
15 Oct 54 CURRENT INTELLIGENCE WEEKLY
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THE SOVIET WORLD
The Sino-Soviet communique issued in Peiping on
11 October illustrates Moscow's treatment, of Communist
China as a great power ally capable of managing its own
affairs. The communique states explicitly that the two
governments enjoy a "complete unity of views."
The only military agreement discloWed in the communique
is for,the withdrawal of Soviet forces from the Port Arthur
naval base area, and the turnover' gratis to the Chinese of
Soviet installations there, by 31 May 1955. The communique
asserts that the truces in Korea and Indochina and the
strengthening of Chinese Communist military capabilities
have reduced the need for a strong Soviet position in Port
Arthur, where the USSR has been maintaining 60,000 troops,
570 aircraft, 12 submarines, and small surface craft.
The agreement on Port Arthur seems connected too with
recent Sino-Soviet conciliatory. gestures toward Japan.
Whereas the Japanese threat was invoked-in"1952 ae~grounds
for retaining Soviet, troops in the Port Arthur area, the
current communique looks toward the "normalization" of
relations with Japan to take care of,this situation.
The Port Arthur agreement may have been aimed in part
at embarrassing the United States on the issue of Formosa.
The communique's language on Formosa questions is mild,
does not mention "liberation,',' and suggests that there will
be further Sino-Soviet diplomatic maneuvers, rather than
an early Soviet-supported military operation against the
island.
In the economic field,, the communique announces the
abolition of the four Sino-Soviet joint stock companies as
of 1 January 1955, the projected construction of two new
railroad links between the USSR and China, and the granting
of new Soviet industrial credits to China.
The abolition of the joint stock companies follows a
pattern established in Eastern Europe, where the USSR with-
drew from direct administration of such enterprises. Soviet
influence may continue to predominate, however, in the
Sinkiang mining company, a suspected source of uranium,
and in the Dairen shipyard, which has been engaged full
time in repairing Soviet ships and building harbor craft
for the USSR. Peiping is to pay an unstated amount for the
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Soviet share of these companies as well as the Sinkiang
oil company and SKOGA, the airline which operates three
routes between Peiping and the USSR.
There is a surprise in the communiqug's disclosure
that the projected Si.no-Soviet railroad through Mongolia
is to be finished next year.
The other railroad through Sinkiang is not expected
to be completed until the 1960's. Peiping started building
this line-1,739 miles from Lanchow in Kansu to the Soviet
border-min 1952. The USSR is to begin construction from
Alma Ata to the Sinkiang border "tin the nearest future."
The completion of these two projects would reduce the
burden on the Transsiberian and Manchurian railroadsand
would also reduce Soviet and Chinese dependence on these
roads, which have been the sole railroad routes into China
from the western USSR.
The new Soviet credit to China is for either 520,000,000
rubles or 920,000,000 rubles ($130,000,000 or $230,000,000
at the current official rate of exchange); neither the
Soviet nor Chinese text makes clear the amount. In either
case the total monetary value of Soviet economic aid to
China will remain modest. Previous Soviet credits for
1950-1954 were for the equivalent of $300,000,000. The
aid program has, however, included delivery of key equip-
ment not available to Peiping from other sources.
The
size of the aid program has been increased to
156
projects,
as compared with the 141 projects announced
in
September
1953.
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SOVIET POLICY CONTINUES TO ENCOURAGE INDIAN:NEUTRALISM
Current Soviet policy toward India is designed pri-
marily to encourage India to undertake the role of moder-
ator and mediator between East and West. Moscow and Peiping
probably hope that this policy--besides strengthening pro-
Soviet attitudes among the Indians--will. result in a co-
hesive, Indian-led bloc of states which could act as an ob-
stacle to further Western defense planning in Asia.
Soviet and Chinese Communist.policies toward India.
have thus far complemented each other. New Delhi was one
of the first states to recognize Communist China, and re-
lations between the two governments were highlighted this
year by the Sino,-Indian agreement : onTibet and the visit
of Chou En-lai to New Delhi in'June. Prime.MinisterrNehru
is scheduled to visit Peiping in October:, Peiping's in-
fluence in India is comparatively new, however, and is not
so firmly established economically or culturally as is that
of the USSR.
Despite a wide disparity between Soviet and Indian
political aims, there are a number of important interna
tional issues on which the USSR and India have similar views.
Outstanding examples are the 'Soviet ,and Indian attitudes
toward the Manila treaty and the,Turkish-Pakistani pact,
UN membership for Communist China, colonial issues;,.Formosa
and South Korea. The USSR has recognized India's position
on these issues as an effective complement to Moscow's pro-
fessed policy of "peace" and. "coexistence,."..
India is second only to the Soviet bloc in backing Com-
munist China for a seat in the UN. India's pose as the
champion of colonial peoples and the USSR's. demand for "na-
tional independence _of peoples" , have. led the ,two powers to
side together on colonial issues--usually against the West.
There have been indications for some time that the USSR has
been moving closer to the Indian position on Kashmir. When
the issue is again brought before the UN during this session'.
Moscow probably will give India 'full support. in charging
that American aid, to Pakistan has made a settlement impossible.
In the economic field, the USSR has made several offers
since the signing of the Soviet--Indian trade agreement last
December which contained a vague reference to Soviet.tech-
nical aid. While these offers are relatively modest, the
USSR will attempt to expand economic relations between the
two countries and to impress India with Soviet technical
achievements.
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The most dramatic gesture has been a Soviet bid to con-
struct a 500,000-ton capacity steel mill, The USSR would
supply the required equipment and technicians on a long-term
credit with attractive terms. An offer of Soviet credit and
technical assistance is also under consideration by a private
Indian syndicate mining industrial diamonds, A delegation
of Indian agricultural and industrial experts is now touring
the USSR. Soviet officials have made overtures for giving
technical training to Indian students,and three Soviet spe-
cialists on mathematical statistics and electronic computers
will work at the Indian Statistical Institute during the
coming year.
The USSR has made extraordinary efforts to develop cul-
tural ties with India. Immense prestige was lent to a per-
formance of Indian artists by the attendance of five presid-
ium members and other top Soviet leaders at the Bolshoi
theater in Moscow on 30 August. On 6 October, Malenkov re-
ceived the visiting Indian deputy minister of health and the
leader of a cultural group now in the USSR. Such gestures
as these have been periodically complemented by Soviet con-
tributions for famine and flood relief.
Neither Moscow nor Peiping has followed up Chou En-lai`s
hint at the Geneva conference that an Asian collective se-
curity arrangement with Orbit and non-Orbit participation
might be desirable. Such a move by Moscow or Peiping might--
by forcing India to choose between East and West--be harmful
to Indian-Orbit relations. India is also unlikely to jeop-
ardize its outspoken neutralist position by accepting military
aid from the USSR if it is offered.
Moscow may believe that continued Indian opposition to
Western defense planning will influence other states suffi-
ciently to prevent further Western alignments in Asia and
weaken those already formed. The successful forging of a
neutral, Indian-led bloc of states would satisfy one of the
aspirations of the Nehru government and fulfill a current
aim of the Communists in Southeast Asia, India has shown no
willingness, however, to change its policy in response to
Soviet influenced Neither Soviet nor Indian attempts to forge
a "third force" bloc in Southeast Asia show signs of being
successful.
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USSR LIQUIDATING GREATER PART OF SOVIET PROPERTY
IN EASTERN EUROPE AND CHINA
The Soviet Union's gradual relinquishing of its share in
joint companies in Eastern Europe and China is part of a gen-
eral campaign to enhance the appearance of independence of
Soviet bloc members. The USSR is apparently confident that
the Eastern European Satellites can carry on industrialization
programs without close day-to-day control from Moscow and con-
siders that Soviet long-range economic objectives will not be
sacrificed by the withdrawal of direct business participation.
The USSR initially adopted two policies for operating the
former German assets in Eastern Europe at the end of World War
II. In some cases, Moscow operated the properties as corporate
entities; in others, it included them as the Soviet share in
Soviet-Satellite enterprises. In joint enterprises, the
Satellites had to contribute an amount equal in value to the
Soviet share. A Soviet officer was always placed in control.
The USSR thus extended its economic control in Eastern Europe
at a time when the political control it had over the area was
still somewhat tenuous.
In mid-1952, the Soviet Union began to liquidate some of
the less important properties it owned in Eastern Europe, in-
cluding the bulk of the former German firms in Hungary, 66
small Soviet-owned corporations in East Germany, and the joint
film company in Rumania. But it was not until August 1953,
when the USSR agreed to return without compensation 33 of the
34 important Soviet-owned corporations in East Germany, that
a major shift in policy began to emerge. This transfer ex-
cluded only the vital uranium-mining enterprise,
On 25 September Moscow announced the sale to Rumania
of the Soviet share in 12 joint companies. Although this
announcement excluded the two joint enterprises most im-
portant to the Soviet Union, the petroleum and uranium mining
companies, the 12 companies that were returned account for
most of Rumania's industrial production. On 11 October,
Moscow announced the return to Bulgaria of the joint ship-
building, construction and civil air line companies. Agai
companies mining nonferrous and uranium ores were omitted
from the list. The return of the joint Soviet-Hungarian
companies--with the probable exception of the bauxite-
aluminum company--seems likely to be announced in the near
future.
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The effect of this liquidation on the Satellite economies
has varied with the terms imposed by the USSR. In East Ger-
many, the effect was beneficial, since the Soviet corporations
were transferred without payment. Hungary, on the other hand,
was forced to purchase the returned Soviet companies--although
because of the small size of the firms involved, the cost was
slight. Rumania and Bulgaria will also be burdened with pay-
ments, but the amounts and terms have not been announced, A
further strain on the Rumanian and Bulgarian economies may be
caused by the withdrawal of Soviet investments in the cor-
por.ationso
In China, the Soviet share in the four Sino-Soviet joint
companies is to be relinquished on 1 January 1955, Compensation
for the liquidated Soviet interests is to be made in the form
of Chinese exports "over a period of years," In China's case,
the four enterprises to be returned accounted for only a
negligible part of the economy. As in Eastern Europe, however,
the announced rationale for the Soviet withdrawal emphasized
that the Chinese economy had matured sufficiently to operate
the enterprises without direct Soviet participation.
In Eastern Europe, the USSR will not sacrifice any part
of its long-range economic control. Moscow will continue to
exercise control through the national economic ministries and
commissions, and, at the top policy level, through the party
leaders. Most of the Soviet personnel assigned to the com-
panies will probably return home; some, however, may remain
and be assigned as advisers at high levels, where their pres-
ence would be less conspicuous.
As a gesture designed to impress the west, the local
populations and the native Communist parties, the dissolution
of the joint companies may prove to be effective propaganda.
The ,joint-company method of Soviet control has long served as
a prime example of the technique of Soviet imperialism.
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COMMUNIST CHINA MAINTAINING IMPRESSIVE
RATE OF ECONOMIC GROWTH*
Communist China's rapid rate of industrial growth in the
first two years of its first Five-Year Plan suggests that the
five-year goal of "More than" doubling industrial output by 1957
will be achieved (see table, p. 14). The announced goal of
attaining the 1932 Soviet industrial level by 1959 is also
expected to be reached.
The industrial output figures just released by Peiping,
in some cases considerably higher than previously estimated,
and the impressive growth rates reported for the first two
years of the plan, suggest that China's industrial progress will
correspond roughly to that of the USSR during its first Five-
Year Plan which ended# in 1932. Because of the high rate of
industrial growth, the rate of increase for both agriculture
and industry is believed sufficient to permit by 1957 an
increase of 25 percent in the gross national product over 1952.
Even by 1957 Communist China will still have only begun
the modernization of its economy and will on the whole remain
agrarian and underdeveloped. There is a strong possibility,
however, that by the early 1960's China will be able to compete
with Japan as a major industrial power in Asia. Although it
started in 1953 from a small industrial base comparable to that
of present-day India, China is now industrializing at a much
faster rate.
Tke situation with respect to electric power, a key indus-
trial item for which fairly complete data are available, is
believed typical of Chinese industrial progress. The 1954
power goal of 10.8 billion kilowatt-hours is nearly double
the peak annual production achieved before 1949. This called
for a 21-percent increase over 1953, which in turn was 26 per-
cent over 1952 output. The electrification part of the Soviet
aid program, which should be nearly completed by early 1957,
will reportedly result in a doubling of China's 1952 power
output.
The 1954 figures are goals yet to be reached. Many
unfavorable contingencies affecting production may not h,ve
been sufficiently considered in predicting 1954 production.
Prepared jointly with the Office of Research and Reports.
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For example, the widespread floods have probably affected mining
operations and transportation of raw materials, and required
allocation of resources for flood relief out of resources
scheduled for industrial utilization. However, since China's
principal industrial areas--Shanghai, North China, and Man-
churia--were little affected by floods, most goals still appear
possible of achievement.
The 17-percent increase scheduled for this year over last
is approximately half the previous year's growth rate, reflect-
ing a tapering off of production increases after wartorn indus-
tries were restored and production rates in many industries
approached capacity limits. In the next few years, the growth
rate is expected to level off at the relatively high 1954 rate,
as new installations under the construction program are brought
into operation.
In contrast to the regime's successes in the field of
industry, a failure to attain significant increases in agri-
cultural production and a concomitant increase of population
since 1952 have reduced per capita food availability in China.
This in turn is interfering with the regime's ability to
expand further the rate of industrial investment.
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COMMUNIST CHINA'S ECONOMIC PROGRESS, 1949-1954
Percentage Annual Increase
in Output
Soviet
Output
1950-1952
1954 Output
in 1932
(China's
Average
1953 1954 plan
Goals
1959
goals)
Industrial output
37%
30%
17%
Agriculture (food
crops)
Electric Power
18
26
20-21
10.8
billion kwh
25X1
14 billion kwh
Coal
26
9
16-18
81.99
million mt
58 million mt
Pig Iron
124
19
32-36
3003
" 't
3.2
Steel Ingot
126
31
21-24
2.17
"
5.9
Cement
68
35
19-23
4.73
3,5
Cotton Yarn
27
13
12-14
4.6
it tales
Paper
50
15
12-18
.48
mt
Tractors
0
0
0
0
50
6
0
,
4
units
Trucks
0
0
0
0
23,845 units
Note: These are official Communist figures, except on agriculture, for which
increases were independently estimated.
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POLITICAL CONDITIONS WORSEN IN HUNGARY
The Hungarian regime is faced with a steadily worsening
political situation resulting from failure to provide firm
direction in carrying out the year-old, revised economic
plans. The government's apparent vacillation and a concur-
rent relaxation of political controls have encouraged the
population to register open disapproval of present Communist
policies.
The general attitude of the population has emerged in
demonstrations of overt hostility toward the regime and its
policies. The defeat of a Hungarian soccer team in an
international game, in early July, led to a spontaneous anti-
regime demonstration in Budapest involving an estimated
15,000 people. The occasion was seized on by the public
to show its dissatisfaction over meat shortages, high food
prices, and other hardships identified with government
policies. American officials making a flood relief survey
this summer were greeted with pro-American demonstrations
by numerous peasants. There was another public demonstration
against the regime and the USSR at the International Uni-
versity Summer Games in Budapest in mid-August. Moreover,
despite the re-establishment of stringent regulations to
prevent departures from agricultural co-operatives, peasants
have apparently continued to leave.
These demonstrations of popular hostility have been
associated with a growing confusion within party ranks and
in the government regarding party policies. Local leaders
have been criticized for applying party directives so
rigidly and zealously as to endanger the welfare of the
workers and farmers. They have also been charged, on the
other hand, with distorting the party's recent line of
"greater liberalism" and permitting discipline to break down.
In mid-September the party political committee issued
a communique severely reprimanding the minister of con-
struction, Lajos Szijjarto, for failing to comply with govern-
ment and party directives and for construction delays.
Similarly, the deputy minister for crop collection, Tasnadi,
was publicly reprimanded for lowering collection quotas, al-
though he was only following established government policy.
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The government has not succeeded in reconciling its
professed. interest in the people?s welfare with the arbi-
trary shifting of large numbers of industrial and urban
white-collar workers to labor shortage areas. During
September, possibly as many as 100,000 workers were dis-
charged preparatory to their being shifted to agriculture
or other industries. The shifts were so poorly planned
that many dismissed workers have not been given new jobs
and remain unemployed. According to the American legation
in Budapest, the scheduled reduction in force at one plant
had to be cut in half because of unfavorable worker re-
action. Other reports received by the legation stated
that worker resistance to layoffs in several other factories
led to police action and arrests.
Local party officials are exhorted by their leaders
to regard these problems as merely temporary and as a
rational step toward reducing government administrative
costs. The current campaign to emphasize nationalism and
the increasing effort to create a popular sense of partici-
pation in local government affairs, both appear to be de-
signed to counter public hostility. The success of these
campaigns is debatable, and they may actually serve to in-
cite the populace further.
As a result rf these deteriorating conditions, Hungary
faces the coming 'i.nter with shortages of fuels, growing
unemployment and ;' ilures in crop collections. Continuing
efforts to ration. i.ize the economy should achieve some
beneficial long-teroi r,,: alts, but prospects for immediate
improvement appea.,- s li ;: ; , The regime is likely to be
faced with further and aoh,;;ibly more serious public de-
monstrations of hostility,
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SPECIAL ARTICLE
THE STATUS OF EUROPEAN INTEGRATION FOLLOWING THE DEFEAT OF EDC
France's rejection of EDC was a marked setback for the
concept of rapid European integration through supranational
institutions. There has, however, been continuing progress
through existing organizations toward integration by means of
closer working relationships among almost all Western European
nations. (see chart, p.21). The most recent development
along this line is the London agreement of 3 October to broaden
the powers of the Brussels Treaty Council.
The Movement for Integration
World War II led to an unprecedented surge of both govern-
ment and private efforts for a united Europe capable of devel-
oping collectively greater economic productivity anu military
strength. The first actual instruments of integration, created
in 1948 and 1949, were of the usual intergovernmental type
through which member nations take decisions in concert. They
were, in the order of their establishment, the Brussels Treaty
Council, the Organization for European Economic Co-operation
(OEEC), NATO, and the Council of Europe.
Supranational institutions--that is, bodies which make
many final decisions without the need for approval by the
national governments--became an immediate objective only with
the launching in May 1950 of the Schuman Plan, which led to
the establishment in mid-1952 of the six-iiation Coal-Steel
Community (CSC). The CSC is developing what may become part
of the apparatus of a future federal government. Meanwhile,
it is serving to promote more rapid integration.
The CSC and the proposals for a supranational European
Defense Community and a European Political Community were the
spearhead of the movement for integration. In view of the
steady resurgence of nationalism since 1952, however, the
intergovernmental, rather than supranational, approach to
integration will probably be emphasized for many years to come.
The intergovernmental organizations, two of which are at
present making co-operation on West German rearmament possible,
have thus far proved to be the only means of drawing Britain
closer to the Continent,
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Western European Union and NATO
The Brussels pact of 1948, originally concluded mainly
as a defensive alliance of Britain, France, and the Benelux
countries against Germany, is, under the new London agree-
ments, to be expanded and revitalized as part of an agreed
substitute for EDC. A new agency is to be set up under the
Brussels Treaty Council to control the armaments of the
Continental members, and the council's decisions on questions
involving this agency are to be made by majority vote. With
certain reservations, Britain has agreed not to change the
size of its forces on the Continent if a majority objects,
Britain had previously refused to consider membership in
EDC or other supranational organizations. It felt it could
make its present concessions, designed to overcome French fears
of a rearmed Germany, only within the Western European Union
(WEU)a
Existing NATO arrangements providing for integration of
forces and of their logistical support make it difficult for
any of the Continental nations to take unilateral military
action. Moreover, as a result of the London conference, these
arrangements may be expanded and tightened. Thus both WEU
and NATO demonstrate how organizations which are primarily
intergovernmental rather than supranational can still be used
to limit national prerogatives.
Council of Europe
The use of existing intergovernmental organizations for
promoting closer integration was heartily endorsed at the mid-
September session of the Consultative Assembly of the 14-
nation Council of Europe. This purely deliberative body at
Strasbourg seeks to co-ordinate national policies on common
European problems. The British regard the Council of Europe
as the most appropriate instrument for promoting the integra-
tion idea, and at the recent session they supported a rec-
ommendation for tighter mutual control of armed forces and
supporting services on the Continent.
Organization for European Economic Co-operation
The 17-nation OEEC is the most important existing
organization for promoting European economic stability. Its
specific aims are the removal of trade barriers and the
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'gr
stimulat.9n, 9 f product.ivity, it commands respgc: in all the
member..cq).trA.es and influences ?na' itignal.. planning through
extensive 'working-level contacts.. Since its decisions,
reached by common consent., affect virtually all of Western
Europe, the O.EC is able to promote the cause of European
unification In the broadest framework, and without the stigma
of American dictation" which had become attached to EDC in
the minds,of many Europeans.
One of'the OEEC's greatest contributions is its continuing
effort to o'bta.in.full convertibility of currencies. National
restrictions on currency exchange, prevalent since the 1930's,
are widely regarded as the,biggest single obstacle to further
economic integration. A big start has been made by facili-
tating payments among the member nations through the European
Payments Union, an offshoot of OEECO An OEEC ministerial
meeting is scheduled for November to consider a broad working-
level report on trade payments and convertibility problems.
Coal-Steel Community
The CSC, the only truly supranational organization in
Europe at~present, will also benefit from the OEEC's achieve-
ments. Promoting a common market only in coal, iron, steel,
and iron and steel scrap, the CSC is highly vulnerable to
clashing decisions by the member nations in the "unpooled"
sectors of their economies. A $100,000,000 American loan
granted in March has given it considerable leverage to in-
fluence national investment policies, however, and the
initially. suspicious industrialists are finding that they
can live with'the new authority.
The CSC High Authority has still not solved the anticartel
problem, however, and it faces a possibly critical showdown
this winter with the coal cartels on reorganization. Para-
doxically, the CSC's position on this issue appears to have
been strengthened by the French rejection of EDC. Since then,
leaders of some of the governments which had.previously sup-
ported the cartels have stressed the need for keeping the
supranational idea alive through the Coal-Steel Community.
The British, moreover, have decided to give CSC presi-
dent Monnet a political boost by entering into talks :looking
toward closer-ties between Britain and the CSC. Tentative
agreement was reached in late September for the establish-
ment of a joint council with consultative functions, but at
present British industry is opposed to any fixed working
agreements,
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In the long run, as Monnet has always contended, the CSC
can scarcely survive without support from broader supra-
national institutions. Hence the outlook for the CSC is
contingent on the vitality of the supranational idea.
Vitality of the Supranational Idea
Support for the supranational approach to European union
has developed deep roots since the Schuman Plan was launched
in 1950. The European Movement--the influential association
of nearly all the varied private groups promoting integra-
tion--demonstrated at its Hague conference in October 1953 that
the supporters of supranational integration had gained a pre-
ponderant position. These groups are making an intense effort
to create both a European patriotism and a broader public
understanding of the national and personal sacrifices full
federation would entail. Since the French assembly's vote
on EDC, public sentiment and government policy in all the
other five countries have continued to promote the idea of
European federation. The London agreement on a new armaments
agency under WEU will give an important fillip to this policy.
The immediate goal of those favoring genuine European
integration is election of the CSC's Common Assembly by pop-
ular vote instead of by the national parliaments Such a step
is viewed as the most feasible means of creating the embryo of
a true European parliament, which would be a basic advantage
in overcoming the reluctance of the six national governments
to go ahead with full federation. In May they agreed to hold
a popular election following EDC ratification. Since the
powerful vested interests which fought EDC are less alarmed
by the prospect.of such a parliament, this plan still has a
real chance of being carried out.
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SPHERES OF EUROPEAN INTEGRATION
AN ALLIANCE Nations give up veto power
in certain cases
COMMUNITY
'ATLANTIC
NATO
North Atlantic Treaty Organization
AN ALLIANCE
Nations give up no sovereign powers
FOR MILITARY INTEG
POSSIBLE POLITICAL
INTEGRAT
RATION
ION.
I WE U'-Western European Union
VOLUNTARY ASSOCIATION
Nations give up no sovereign powers
I
LITTLE EUROPE
CSC Coal - Steel Community
EDC * European Defense Community)
EPC * European Political Community)
FEDERATION - SUPRANATIONAL
Nations give up some sovereign powers
FOR GRADUAL ECONOMIC
& POLITICAL
INTEGRATION
I German membersnia in NATO, and WEU'S powers are considered
as envisaged in London agreements.
WESTERN EUROPE
OEEC Organization for European
Economic Cooperation
C E Council of Europe
FOR MILITARY INTEGRATION
FOR RAPID MILITARY
'ONOMIC&POLITICA
INTEGRATION
FRANCE CSC
WEST GERMANY'
3.BENELUX EPC'
ICE ~ OEEC
GREAT BRITAIN
UNITED STATES
CANADA
ICELAND
NORWAY
DENMARK
GREECE
TURKEY
PORTUGAL NOT no- in c[)
NORWAY
SWEDEN
AUSTRIA
SWITZERLAND
2,6X1
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