Differences between the American and Russian delegations on consultations with Korean political parties arose in the 37th meeting of the Joint Commission on July 2, 1947, and continued unresolved. The basic issue involved in these disputes concerned the composition of the list of parties and organizations to be invited for initial consultation on the formation of a provisional Korean Government. The USSR remained firm in its refusal to allow those parties and organizations falling within the following categories to be included: 1) those not classified by them as social organizations, 2) district and other local organizations, and 3) those which the USSR contended did not intend to support the Moscow decisions, particularly members of the Anti-Trusteeship Committee and similar organizations.

The period from November, 1947, to the middle of April, 1948, ended with a number of fundamental changes in the nature of the occupation of Germany: 1) the Allied Control Council for Germany held no meetings after March 20,1948, and was regarded by the press as virtually dissolved; 2) reorganization of the bizonal government of the combined occupation zones of the United States and the United Kingdom resulted in the formation of a substantially new governmental structure for the area; 3) considerable progress was made toward the integration of the French zone of occupation with the British and American zones, together with the establishment of trizonal policies designed to place western German industrial production into close relationship with the European Recovery Program. All three developments closely followed the failure of the London meeting of the Council of Foreign Ministers in December 1947 to reach agreement on the terms of the treaty of peace with Germany.

At a meeting of the Allied Council on April 30, the Soviet High Commissioner (Kurasov) asked for a revision of existing arrangements concerning air communications. A difference in the Russian and English texts had led to a disagreement concerning passage of non-transport planes over the Soviet zone. The United States agreed to discuss the new proposal, but the British and French High Commissions refused and the matter was dropped. Since the English text was the authoritative one for that meeting, the provisions contained in it were retained as binding.

The fifth session of the Council of Foreign Ministers met in London from November 25 to December 15, 1947, to discuss the drafting of peace treaties for Germany and Austria. It met without an agreed agenda and adjourned without agreement. The first ten days were devoted to a discussion of the mechanisms necessary for the preparation of a German treaty, with two sessions devoted to the question of Austria; discussion in the last ten days centered around the problem of the related questions of immediate economic and political unity for Germany and the level of Germany's reparations payments. On most questions, press reports indicated that France, the United Kingdom and the United States were in general agreement, with the Soviet Union in opposition.

On January 24, 1948, the Soviet proposals for the settlement of Soviet claims against German assets in Austria were communicated to the permanent secretariat of the Council of Foreign Ministers in London. These proposals, which Secretary of State Marshall (United States) had urged the Soviet to submit during the Moscow session of the Council of Foreign Ministers (December 1947), although representing approximately a 50 per cent reduction in former Soviet claims, demanded for the Soviet Union 1) concession rights to two-thirds of current oil production and two-thirds of the exploitation privilegesin all undeveloped oil. areas in eastern Austria for a period of 25 years; 2) possession of oil refineries with a total annual capacity of 450,000 tons of crude oil; 3) possession of all assets of the Danube Shipping Company located in Hungary, Bulgaria, Rumania and Austria; 4) surrender by the four powers of all property rights to former German enterprises in Austria and payment by Austria in compensation of $200,000,000 in United States currency to the Soviet Union and of undetermined amounts to the other three powers; 5) transfer of such assets to the Soviet Union subject to alienation only with the consent of the Soviet Union, and free from obligations accrued prior to Soviet possession; and 6) settlement of disputes arising in connection with the application of treaty provisions relating to German assets on a bilateral basis between Austria and the Soviet Union. After receiving the Soviet proposals, Secretary Marshall proposed that the Foreign Ministers' Deputies meet in London in February to work for further progress on the drafting of the Austrian treaty.

In the period under review the Far Eastern Commission approved policy decisions relating to: 1) interim import-export policies for Japan, together with the controls necessary for enforcement; 2) the reduction of Japanese industrial war potential; 3) the supply of food for civilian consumption in Japan. It also approved a proposal that fines collected by the military occupation courts should be set aside as a special fund to be used to defray the costs of Allied occupation.

Since March 20, 1948, the Allied Control Council for Germany has virtually been dissolved, thus, in effect, ending four-power control in Germany. Following the failure of the Allied Control Council to meet during the latter part of March and the early part of April, the three powers controlling western Germany decided to go ahead and discuss the possibility of establishing political and economic stability in their respective sectors of Germany. This decision resulted in the reopening of the six-power conference on April 20 and the announcement of a currency reform on June 18. Immediately following the latter action, the USSR began a land blockade of Berlin and on July 1 withdrew from the Berlin Kommandatura, the last remaining four-power governing body in Germany.

During the period under review, the Foreign Ministers' Deputies on the Austrian treaty, meeting in London, failed to agree on the terms of the proposed treaty of peace for Austria. Following a deadlock on the question of Yugoslavia's claims on Austria, the four-power talks were adjourned indefinitely on May 6. These claims, backed by the USSR, included a demand by Yugoslavia for 788 square miles of territory in Carinthia and Styria and $150,000,000 in reparations. The United States position, backed by the United Kingdom and France, was that Austrian territory should be restored intact as it was January 1, 1938, prior to annexation by Germany, and that Austria should pay no reparations. The indefinite suspension of the four-power talks on the Austrian peace treaty was formally reported on May 24 to the Secretary General of the Council of Foreign Ministers by Samuel Reber, United States deputy and chairman of the next meeting. The way was held open however, for the calling of the next meeting when a justifiable basis for continued negotiation was found.

In the period from January 1 to April 15, 1948, the major policy decision approved by the Far Eastern Commission dealt with the prohibition of military activity in Japan and disposition of Japanese military equipment. On February 12, 1948, the Commission directed that the possession of arms, ammunition, and implements of war by any Japanese should be prohibited, save that which might be authorized for Japanese civil police agencies and licensed hunters. The development, manufacture, importation or exportation of arms, ammunition and implements of war, the manufacture of aircraft of all kinds, and the construction of naval combatant and auxiliary vessels were similarly prohibited. In addition, reestablishment of any of the military ministries and their subsidiary service groups – such as the Naval General Headquarters and the Imperial High Command – was prohibited, together with ex-officers clubs, para-military organizations, or even associations of ex-officers ostensibly founded for legitimate purposes but being disguised forms of military organizations. All senior officers andc career officers in the Army, Navy and gendarmerie were prohibited from employment in the government service or educational institutions unless performing services essential to demobilization and repatriation.

On June 5, 1947, the Secretary of State of the United States, George C. Marshall, stated that the United States could not proceed much further with its plans to assist European recovery unless the countries themselves reached some agreement as to their requirements and to their own contribution to European recovery. Immediately following this speech at Harvard University, representatives of the United Kingdom, France and the Soviet Union met in Paris to discuss the possibility of a joint conference on the problem. After the Soviet representative (Molotov) withdrew, sixteen nations, upon the invitation of France and the United Kingdom, met in Paris from July 12 to September 22, 1947, to draw up a joint program for European reconstruction. Participating countries were: United Kingdom, Austria, Belgium, Denmark, France, Greece, Iceland, Ireland, Italy, Luxembourg, Netherlands, Norway, Portugal, Sweden, Switzerland and Turkey.

Work of the Agency in 1947: By January 1948 some progress had been made in carrying out a reparation program for the 18 signatory governments, but disagreement over the political and economic future of Germany impeded the reparation plan as foreseen at Potsdam and reparation assets made available to the Inter Allied Reparation Agency for allocation had been few in number. Between January 1 and December 31, 1947 the Assembly of IARA approved the allocation of equipment from plants of a total value of 132 million Reichsmarks. Since the establishment of the Agency the cumulative total of plants or part plants made available was 261, of which equipment from 197 had been allocated to member governments. More progress was reported in the distribution of the German merchant fleet; by the end of 1946 most of the usable shipping had already been allocated and agreement was made regarding the remainder during the first half of 1947. This meant that 274 ships were distributed and the remaining vessels, suitable only for scrapping, were distributed to the highest bidders among member states.

The Far Eastern Commission on June 9 approved a policy decision permitting the Supreme Commander for the Allied Powers, upon receipt of the appropriate invitation, to appoint members of his staff as observers at intergovernmental conferences where attendance would be of interest to the occupation. Japanese technical personnel might accompany any SCAP staff when it was deemed necessary and was acceptable to the country which was acting as host to the conference. On March 13 the commission had rejected by a vote of 8 to 1 with 2 abstentions a motion to censure the Supreme Commander for the Allied Powers (MacArthur) for sending a Japanese to attend the Geneva radio frequency conference of the International Telecommunications Union as technical adviser to General Mac Arthur's observer at the meetings.

The European Central Inland Transport Organization, which had been created on September 27, 1945, as a temporary reconstruction organization, was dissolved following its ninth council session on September 29, 1947. In accordance with previous agreement its functions were assumed by a committee created by the Economic Commission for Europe.

The seventeenth session of the Assembly of the Inter Allied Reparation Agency, concluded on May 28, 1948, allocated as reparation among member governments equipment in thirteen German plants, ten of which were in the British zone of Germany and three in the French zone. This brought the total number of plants allocated to that date to 247. The Assembly also assigned the second list of commodities to be delivered by the USSR as part of German reparations. This action followed the agreement made at Potsdam whereby the USSR during a period of five years would make available to the IARA commodities equal to 60% of the industrial capital reparations received by the USSR from the western zone.

On April 2, 1948, the Congress of the United States passed legislation authorizing the appropriation of $6,098,000,000 for foreign aid, of which $5,300,000,000 was allocated for the first twelve months of the European Recovery Program. The bill became effective upon the signature of the President the following day, and early in April Mr. Paul Hoffman, President of the Studebaker Company, was appointed as director of the Economic Cooperation Administration, an independent agency to handle the funds appropriated by the Congress.

Final windup of the activities of the International Emergency Food Council, which replaced the Combined Food Board on June 20, 1946, took place during the latter part of 1947. Formed as an emergency mechanism to recommend allocation of scarce commodities, IEFC was responsible, during the eighteen months of its existence, for the distribution of a major portion of the world's food supply.

The seventeenth annual report of the Bank for International Settlements, which reviewed the period April 1, 1946, to March 31, 1947, covered such topics as 1) the transition from war to peace economy, 2) price movements, 3) recovery of foreign trade, 4) foreign exchange rates, 5) the production and movements of gold, 6) post-war settlements and new foreign lending, 7) internal credit condition, and 8) national economic plans in Europe. Reference was made to the fact that as a result of informal discussions between the President of the International Bank for Reconstruction and Development and the Chairman of the Board of Directors of the Bank for International Settlements, a memorandum had been worked out regarding the bases for cooperation between the two organizations. As of June, 1947, the Board of Directors of the Bank included representatives of Belgium, France, Italy, the Netherlands, Sweden, Switzerland, and the United Kingdom. Because of the war Germany and Japan were not represented but were still technically considered to be members.

The sixteen nations of western Europe participating in the Economic Recovery Program signed on April 16, 1948, a convention formally establishing the Organization for European Economic Cooperation, providing machinery for the handling of European aid, and including a legally binding contract for self-help to supplement and eventually eliminate the need for outside aid. The principal aim of the organization was stated as the speedy establishment of sound economic conditions, without outside assistance, so as to make a full contribution to world economic stability. The sixteen governments and the western zones of Germany pledged their efforts to a maximum exchange of goods, lower tariff barriers, work towards a customs union, achievement and maintenance of financial and monetary stability, and the best use of their manpower.

On March 17, a 50-year pact was signed at Brussels by the United Kingdom, France, Belgium, the Netherlands, and Luxembourg. Under the provisions of the pact, the signatories agreed to coordinate in so far as was possible their national policies in the economic, social and military spheres. Economic phases of the agreement included the elimination of conflict in national policies, and the development of commercial exchanges to promote European economic recovery. This cooperation was to be provided for by a consultative council which was to meet whenever necessary, or immediately upon the request of any of the parties for consultation on any situation which might constitute a threat to peace. The signatories also agreed to develop the social services of their individual countries, to promote a higher standard of living, to conclude social conventions with other countries, and by cultural exchanges and other means to promote understanding of their common civilization among the people of the five nations. These ends were to be accomplished either directly through the consultative council, or through specialized organizations whose creation was envisaged by the treaty.

The special session of the International Wheat Council which began in Washington on January 28, 1948, announced on March 6 the successful conclusion of a five-year International Wheat Agreement fixing a range of prices within which 500 million bushels of wheat would flow annually through the channels of international trade. The agreement was signed by some 36 nations, including all the major wheat-importing and wheat-exporting countries of the world with the exception of Argentina and the Soviet Union. Subject to the ratification of the signatory states, the multilateral agreement — the first of its kind in history — was to come into force on August 1, 1948, climaxing many years of effort to stabilize the world wheat market through international cooperation. The agreement provided maximum and minimum prices for each of the five years of its duration and specified quantities to be purchased or sold by each of the importing and exporting nations. While transactions outside the prescribed range were permitted, they would not apply toward the fulfillment of each member's quota under the agreement.