550.S1 Monetary Commission/22: Telegram
The Chairman of the American Delegation (Hull) to the Acting Secretary of State
[Received July 16—12:50 p.m.]
141. The following is the draft text of a resolution which will come before the monetary subcommittee on immediate measures Tuesday, July 18th:
“(1) The service of external debts is in different degrees an important element of the debit side of the balance of payments of many countries and can only be assured if the debtor country can produce the necessary resources. The facility with which such resources can be procured in the present and in the future may depend on the revival of economic activity and credit operations. It will also depend to a large extent on the policy adopted by the debtor country.
The problem of indebtedness therefore presented itself under a double aspect: its settlement may in certain cases be necessary for the reestablishment of equilibrium. It should not however be pursued to the detriment of credit.
(2) The conditions in the debtor countries vary considerably and it is undesirable to lay down general principles. But it is indispensable for the restoration of credit that contracts should be respected in the absence of modification agreed between the parties concerned. Debtor countries in their own interests should make every effort to meet the service of their debts if they possibly can do so and the Commission considers that every commendation should be given to the efforts which debtor countries have made to meet their obligations despite their difficulties.
(3) When arrangements are recognized to be necessary they ought to be made in such a way as to be able to restore confidence. They should therefore be limited to those cases where they are unavoidable, be made between debtors and creditors themselves and be based on the debtor’s ability to pay. It is moreover in the interest of the creditors themselves to conclude arrangements of such a nature as will permit the adoption at the same time of a policy of economic and financial restoration by the debtors and will allow such policy to be fully effective.
(4) The Monetary and Financial Commission considers it desirable that in each of the countries concerned there should exist organizations in a position to represent the several classes of creditors in respect to their loans including in suitable cases, short as well as long term loans and that such organizations should maintain such contact with one another as may be necessary to facilitate their proceedings.
The Commission therefore recommends to the governments in these countries that they should encourage the creation of a contact between organizations of this kind where they do not already exist at such times and in such measure as action can in their view be usefully applied.”
There is likely to be discussion on the following points which may result in amendments: [Page 721]
- (a)
- The British favor only temporary agreements and may insist on such wording while the debtor countries urge final settlements now on basis of existing conditions.
- (b)
- Various debtor countries favor more pointed insistence upon creditor countries removing obstacles to the free movement of goods particularly by lowering tariffs. The British are sympathetic to this idea which is more applicable to the other lending countries than to themselves.
- (c)
- The Greek delegation urges the necessity of concluding special commercial treaties between the great creditor states and the small debtor countries with the object of facilitating the imports of certain products from debtor countries at specially reduced tariffs. The Germans may also urge somewhat similar ideas.
- (d)
- The French favor pointing out in the resolution that it is at the present time open to any debtor state which is unable to agree with its creditors to avail itself of the services of qualified international authorities such as the Financial Committee of the League with a view to an inquiry into its financial position.
Your observations upon the present text of the draft resolution and any suggestions as to the American position that should be assumed on the four lettered points are requested and if at all convenient should be received by Tuesday morning.