Foreign Relations of the United States: Diplomatic Papers, 1943, The British Commonwealth, Eastern Europe, the Far East, Volume III

841.24/2124

Memorandum by Mr. Kermit Roosevelt, Jr., Assistant to the Assistant Secretary of State (Acheson), to the Under Secretary of State (Stettinius)

[Washington,] October 18, 1943.

Mr. Stettinius: A meeting was held this morning in the Under Secretary’s office at which there were present the following: Messrs. Stettinius, Acheson, Pasvolsky,³³ Atherton,³⁴ Matthews,³⁵ Hickerson,³⁶ Hawkins,³⁷ Stinebower,³⁸ Achilles and Roosevelt. Mr. Berle was invited but was unable to attend.

The meeting was held to discuss three issues in British and American relations growing out of lend-lease. These issues had been set forth by Mr. Acheson in a memorandum circulated to those concerned before the meeting. I attach a copy of Mr. Acheson’s memorandum and two documents circulated with it for your files.

The meeting came to the following conclusions:

1. That it was most desirable that the British and ourselves announce as soon as possible the figures on the value of reciprocal aid provided to the United States by the United Kingdom and the Dominions. Mr. Acheson agreed to do everything possible to enable the British to make this announcement by Thursday³⁹ of this week. It was further agreed that this announcement should contain a statement that the British and United States Governments have agreed in principle that reverse lend-lease should be extended to include raw materials purchased by the United States Government, and that details of procedure are now being discussed.

2. It was agreed that in the Department’s view it is essential that reciprocal aid of raw materials be worked out, and that any suggestion that might be made by FEA⁴⁰ that the idea be given up should be resisted vigorously by the Department.

3. It was evident that there are differences of opinion within the Department on policy with respect to the British gold and dollar balances. Mr. Acheson drew the attention of the meeting to a draft letter to Mr. Crowley⁴¹ now being circulated among the members of the President’s committee on dollar position from Mr. Harry White. It was agreed that there should be a further meeting of those concerned to consider the Department’s policy on this question.

4. It was generally felt that the time was inauspicious for an announcement that the Eden-Winant White Paper is being replaced by a mutual declaration of principles, including provisions for the programming of export requirements through combined machinery. However, it was also felt that the British would require some definite understanding on this point before going too far in arrangements for raw materials. It was suggested that the solution was to formulate the United States Government’s policy on this question and to inform the British, but not to make any formal arrangements for an exchange of notes until somewhat later.

During the meeting Mr. Stettinius also raised the possibility that there would be considerable criticism if it should develop that neither we nor the British were able to give figures indicating the amount of material provided originally to the British under lend-lease which had been sent in turn by the United Kingdom to the Soviet Union under the Protocols.⁴² Mr. Stettinius requested Mr. Roosevelt to take the necessary steps to obtain such figures.

[Enclosure]

Memorandum by the Assistant Secretary of State (Acheson)

[Washington,] October 16, 1943.

The British Government proposes to lay before Parliament on Thursday, October 21, unless we intervene to the contrary, a White Paper announcing the figures regarding reverse lend-lease from the British to the United States and also announcing that the British Government will expand reverse lend-lease to include raw materials acquired by the American Government and the British Colonial Empire. The announcement has already been postponed once at the last moment at the request of this Government.

The imminence of this action requires immediate decision as to the position of this Department and of this Government on three major issues closely involved in it. These issues are:

(a) The suggestion which FEA proposes to take up with Mr. Crowley on Monday⁴³ that reverse lend-lease on raw materials is unworkable because of the conditions attached by the British and that it should be abandoned altogether in favor of (b).

(b) A policy advocated by the Treasury of reducing direct lend-lease assistance to the British to the extent of some $300,000,000 or more for the purpose of reducing the British foreign exchange assets to $1,000,000,000 in accordance with a memorandum approved by the President last January stating that the above amount should be regarded as the point at which lend-lease aid should be reduced.

(c) An issue which has arisen over the replacement of the Eden White Paper restricting British use of lend-lease materials by a mutual declaration of principles to be followed by both countries in their disposition of lend-lease or reverse lend-lease materials which each might receive from the other.

A. Reverse Lend-Lease of Raw Materials

Since last May this Government has pushed the British to agree to give us raw materials on reverse lend-lease.⁴⁴ Mr. Stettinius, Mr. Hopkins, and Mr. Morgenthau, as well as officers of the Department, have strongly urged this action upon them. Formal notes have been presented to the United Kingdom Government and to the Governments of the Dominions, the latter within the last two weeks. The British Government has informed us of its agreement in principle and wishes now to announce it.

Discussions as to methods have been undertaken between OEW and the British Raw Materials Mission. In a recent communication the British have unwisely but understandably insisted that the procedure and principles applicable to our acquisition of raw materials on reverse lend-lease should be the same as those applied to them on direct lend-lease including procedures contemplated in the Eden White Paper restricting exports. The OEW authorities regard such procedures as entirely unworkable since they approach the matter solely from the point of view of reducing the British dollar balances. They are now inclined to feel that the whole proposal was a mistake, that it should be abandoned and that the dollar balances should be controlled directly by reducing our lend-lease to the British. While no final view has been given us, I anticipate that this will be the attitude that they will take.

Such an attitude, aside from making the position of the Department entirely untenable, would produce a serious crisis in our relations with the British. While reverse lend-lease of raw materials has an important bearing on the dollar position, both the Department and the Lend-Lease Administration have regarded its principal importance as extending the principle of mutual aid to a new and important field and thus obtaining substantial benefits for the United States and meeting criticisms which have been directed to the failure to obtain these benefits. It has been discussed with the British in these latter terms.

B. British Dollar and Exchange Assets

Last January a memorandum approved by the Cabinet members concerned and the Vice President was approved by the President in which it was stated that at that time it appeared that foreign exchange assets between $600,000,000 and $1,000,000,000 furnished the British with an ample reserve and that lend-lease policy should be reconsidered if British assets exceeded the top amount. It was contemplated in the memorandum that the policy was subject to review. Mr. White in a current proposal for action points out that the British foreign exchange assets are now $1.5 billion and are expected to be $1.7 billion at the end of the year, against which there is a possible deduction of $315 million. Even though the British gave us reverse lend-lease of raw materials, he estimates that the assets will exceed $1 billion by $200–$300 million by the end of the year and therefore proposes that lend-lease aid shall be reduced by this amount. There is attached a copy of Mr. White’s memorandum and also of a memorandum prepared by Mr. Stinebower’s division.⁴⁵

The British have filed a comprehensive memorandum pointing out that while their foreign exchange assets have increased, their quick liabilities have increased at a far greater rate and amount. They submit that action calculated to restrict their foreign exchange assets, while their liability increase[s,] would put them in an impossible position. Questions also arise as to whether Mr. White’s proposal would achieve the stated purpose, by reason of the fact that the British either might not spend their dollars or that they otherwise would act to stop the accumulation of dollars.

It is plain that the proposed action is of the utmost seriousness; it is one which vitally concerns this Department.

C. Substitution of the Eden White Paper

The Eden White Paper has produced friction between the two countries out of all proportion to any substantial question involved. British exports have sunk to a negligible amount. However, there has been criticism of specific exports both from business men affected and from political sources. This has led to an attempt on our part to supervise the administration of a document which the British have regarded as a declaration to be carried out in good faith by their own Government. The introduction of reverse lend-lease of raw materials has led the British to take the technical position that the Eden White Paper should be applied to us as well as to them but their real position is that it should be replaced by a mutual declaration by both governments which each would supervise in its own country in accordance with broad programs agreed upon through combined machinery.

Dean Acheson

33. Leo Pasvolsky, Special Assistant to the Secretary of State.
34. Ray Atherton, Minister to Canada, temporarily in Washington.
35. H. Freeman Matthews, Chief of the Division of European Affairs.
36. John D. Hickerson, Assistant Chief of the Division of European Affairs.
37. Harry C. Hawkins, Chief of the Division of Commercial Policy and Agreements.
38. Leroy D. Stinebower, Chief of the Division of Economic Studies.
39. October 21.
40. Foreign Economic Administration.
41. Letter not printed. Leo T. Crowley was Foreign Economic Administrator.
42. For correspondence concerning the continuation of wartime assistance from the United States for the Soviet Union, see pp. 737 ff.
43. October 18.
44. According to a draft memorandum to President Roosevelt, dated November 17, 1943, drawn up by the Treasury Department and submitted to the Department of State for consideration, discussions with the British concerning raw materials as reciprocal aid were initiated in May by the Treasury Department (841.24/2168).
45. Neither printed.