841.4001 Motion Pictures/194: Telegram

The Ambassador in the United Kingdom ( Kennedy ) to the Secretary of State

2177. I had a long talk with Stanley this morning on the films situation and he has given me the following outline of agreement. It is a terrific improvement on anything they have intimated up to the moment but have the American people go over it without letting it get out to the public and let me have their reactions as quickly as possible. In the meantime I will be thinking it over and will have my suggestions ready when I get the reactions from America.

“1. Period of the agreement. The agreement to run for 1 year beginning 1st October, 1939.

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2. First 6 months. During this period the American renting companies will be authorized to remit in dollars 60 percent of their net takings on the basis of past trading. For this purpose the figure of £7,000,000 mentioned by the American Ambassador is accepted as a fair estimate.

The allocation of this sum as between companies would be made on the basis of a scheme to be drawn up by the companies.

Net takings means the amount left after subtracting all expenses of the renting organization here including the money spent on acquiring films for quota purposes.

To ensure the continuance of film production in Great Britain the renters quota will be maintained at its present level but consideration would be given to alternative proposals that would ensure full use being made of the available facilities for production.

The necessary power would be taken to treat this period as continuous with the preceding period (April to September, 1939) for the purpose of fulfilling the quota obligations under the Films Act.

3. Second 6 months. In this period the amount to be remitted in dollars will be reduced from 60 percent to 40 percent, the basis of calculation remaining the same.

Consideration would be given to the possibility of replacing the quota by arrangements under which the American companies would agree to make available a certain sum of money, roughly equivalent to their obligations under the quota, i. e., for film production in this country. This money might be paid into a fund and guaranteed a fixed rate of interest. This interest could be exported in the form of dollars.

It would also seem desirable that the American companies should agree not to increase prices beyond the present levels. Cases of dispute would be referred to a joint committee of renters and exhibitors in the first instance and, if necessary, to a single arbitrator appointed by both parties in agreement.

4. Sterling balances. Arrangements for dealing with the remainder of the accumulated sterling balances are under consideration by the Treasury. It is clear that some means must be found for “freezing” them effectively. If this took the form of some special kind of Government security carrying a fixed rate of interest, the interest so earned could be exported in the form of dollars”.

I also received the following personal note from Stanley which refers to getting some productions started here without of course prejudice to any agreement that might be signed. I think he needs this for political purposes and he called me up and stressed its importance. Will you have Hays and the group consider it. I think it might be good business for any further adjustments we may need.

“My dear Ambassador, I enclose a note of the proposals I put to you this morning. I quite appreciate that these proposals must be carefully considered on the other side and that this may take some time. On the other hand I am, as you know, being very hard pressed by the producing side of the industry here to put an end to the uncertainty which is reflecting in widespread unemployment of labor and resources generally.

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If there is any likelihood of negotiations being protracted, do you think anything could be done to get over the difficulty by persuading some of the American companies, without prejudice, of course, to the outcome of the negotiations, to release a few orders and relieve the present stagnation? I am told that there are contracts actually in being that would have been signed some weeks ago but for the intervention of the war. Yours sincerely, Oliver Stanley.”

Kennedy