ECONOMIC POLICIES TOWARD GERMANY
 
 
1.   Need for Multilateral Determination of Policies
 
     It is essential, in the economic as in other fields,
that policies with respect to Germany be directed toward
the central aim of keeping her disarmed through an
effective international security organization.  A sub-
stantial measure of agreement must be obtained in advance
on economic policies toward Germany, and such policies
European rivalries from this source.
 
2.  Policy Recommendations
 
     In the Department's view, our eventual objectives
with respect to economic treatment of Germany should 
be (1) abolition of German self-sufficiency, and (2)
elimination of the instruments for German economic
aggression.  These two objectives conform to the general
economic foreign policy of the United States.  More
important, however, it is only through the kind of 
orientation of the German economy which is envisaged in
these objectives that the basis for international secu-
rity organization can be permanently assured.
 
     These two objectives are closely related.  Abolition
of self-sufficiency requires the removal of all protec-
tion and subsidies to high-cost domestic production.
Elimination of the instruments for German economic
aggression requires the prohibition of all discrimina-
tory trade controls, clearing agreements and interna-
tional cartel arrangements.
 
     The eventual objectives imply the assimilation -
on a basis of equality - of a reformed, peaceful and
economically non-aggressive Germany into a liberal sys-
tem of world trade.  During the period of military gov-
ernment and over a control period of much longer dura-
tion, economic policies with respect to Germany will
have to be largely based upon other objectives, namely,
(1) reduction of Germany's economic war potential, and
(2) assisting the economic reconstruction and develop-
ment of the victorious countries.  Although these latter
objectives must be over-riding, it is important that
development of the German economy should not be so dras-
tically restricted as to prevent the maintenance of a
basic livelihood for the German people.