The Acting Secretary of State to the Chargé in Great Britain ( Laughlin )
2976. For Crosby from McAdoo. Treasury 576. Embassy’s 5620 from Paris October 29 midnight. Your 634. Embassy’s 5662 from Paris November 1, 12 p.m. Your 644. Embassy’s 5830 from Paris November 13, 1 p.m. Your 666.2
- First. The outstanding contracts in United States of Allied Governments are being compiled. Indications are they will not reach very heavy total and that they will be substantially reduced by cancellations.
- Second. Regard it as unlikely that Allied Governments will desire to make further additional purchases here for strictly military purposes to any important amount but their applications for new purchases will be strictly scrutinized. Our loans for war purposes should rapidly diminish and soon cease. Loans to some countries for food may have to continue as a war measure until declaration of peace.
- Third. Have no authority to make advances for reconstruction or other after-the-war purposes but expect to ask authority to establish credits after peace for limited period and to limited amounts so as to be able to furnish credits for some of Allied Governments who for a time after peace is declared would not be in a position to purchase except on credit certain of our commodities of which they are in need. Such sales may aid us in finding markets for our commodities and there may be considerable pressure here to induce Government to extend such aid. I feel we must be careful not to involve our Government too deeply and must encourage private financing of foreign business as much as possible.
- Fourth. Under existing legislation we have authority before peace within limits of existing appropriations to establish credits from which advances may be made to take care of commitments made in the United States by Allied Governments in order that supplies they require for prosecution of the war should go forward in an orderly manner. I propose to establish such credits to the extent necessary to care for such commitments but have given no assurances in this respect to Allied Governments nor do I consider myself bound to make advances for this purpose as some of Allied Governments may be in a position to meet their commitments otherwise than through borrowings from the United States.
- Fifth. Our advances for purchases other than those named in the United Slates should cease as soon as possible and new commitments for neutral purchases should not be made by any of Allied Governments in the expectation that our advances may be used to meet same. See our 560.3 Assuming additional authority for credits given by Congress then as soon after declaration of peace as practicable, and before if possible, our loans to Allied Governments should in general be limited to expenditures for extraordinary replacements and not cover commodities for general consumption.
- Sixth. Approve of your indicating informally to Allied Governments that they should notify their nationals who are interested in the import of articles of general consumption to undertake at once to make private arrangements for their purchases and to state that a policy of retrenchment in the Government’s loans from the United States must be contemplated as a consequence of the armistice. The views above expressed coincide with the conclusions which you indicate you have reached as set forth in your 666. This is fortified by the important considerations set forth in paragraph 5 of your cable of that number.
- Seventh. I would like to see all restrictions on arbitrage exchange transactions removed and our advances to support exchanges discontinued. We must however recognize that the ability of a foreign government and its nationals to obtain commodities from us depends on their ability to prevent their exchange going to prohibitory figures which in turn would prevent them from utilizing our markets through private transactions.
- Eighth. Am interested to know that in your opinion private assets available in allied countries if used to maximum will suffice as basis of credit for transactions involving private needs. While I approve of discussions with Allied Governments on the lines that the Treasury may not make advances to foreign governments for these purposes, [Page 537]the time has not yet come to take final and positive stand on the subject.
- Ninth. It is obviously important that United States should retain the utmost freedom of action in the disposal of its resources. Am disposed to agree with your conclusion as to restricting the functions of inter-allied bodies and gradually decreasing their activities and importance, thus concentrating all important negotiations and decisions in Washington. I do not think however these considerations should cause us to ignore the advantages of cooperation in certain situations, and I am quite willing to consider cooperation where-ever the advantages to be derived therefrom are demonstrated.
- Tenth. Determination of other branches of government and decisions at peace conference must have important effect in determining the Treasury policies. Am therefore unable at present to prescribe any hard-and-fast rules, but for your guidance give you my present views in the light of such information as I have at hand.