Foreign Relations of the United States Diplomatic Papers, 1940, The British Commonwealth, The Soviet Union, The Near East and Africa, Volume III

610.4115/42

The British Ambassador (Lothian) to the Secretary of State

Memorandum

I

In memorandum “A” attached to his Aide-Mémoire of July 3rd, 1940,⁸⁰ the British Ambassador informed the Secretary of State that His Majesty’s Government in the United Kingdom were greatly interested in the United States proposals to be made at the Habana Conference for dealing with the export surpluses of the Western Hemisphere, and that the United Kingdom Government were engaged on a survey of the problem of the surpluses of countries of the British Empire and Allied as well as British Colonial territories. It was suggested that the United Kingdom and United States Governments might exchange information as to their respective plans for dealing with the export surpluses of the two groups of countries, and give consideration to the possibilities of concerting them.

2. The Habana Conference referred the further study of the problem of surpluses as affecting American countries to the Inter-American Financial and Economic Advisory Committee in Washington⁸¹ and Congress has since passed a bill to increase the lending authority of the Export–Import Bank by $500,000,000 for the purposes of “assisting in the development of the resources, the stabilisation of the economies, and the orderly marketing of products of the countries of the Western Hemisphere”.⁸²

3. The main new development on the United Kingdom side is the Prime Minister’s announcement in the House of Commons on August 20th⁸³ that His Majesty’s Government would do their best to encourage the building up of reserves of food and raw materials all over the world and arrange for their speedy entry into any part of occupied Europe once it has genuinely regained its freedom. This proposal would at one and the same time contribute to a solution of the problems of surpluses and be a constructive basis for repairing the economic ravages of the war, both now and in the post-war period.

II

4. It appears to His Majesty’s Government from the consideration which they have so far been able to give to the subject of world surpluses that the problems which the American and the non-American groups of countries have to face necessarily overlap and cannot be solved in isolation, not only as regards storage or marketing or control of production, but also as regards satisfaction of the import needs of the surplus producing countries. It would obviously be useless to store surpluses in one country if in other countries surpluses of similar or competing commodities continue to be produced and to be marketed at bankrupt prices, while producing countries want to be assured not only of a reasonable market for their product but also of the supply of their essential import requirements. The financial problems involved are equally vast and interlocking. Their solution is probably beyond the capacity of the United Kingdom and the individual countries in the non-American group and equally of the United States and the individual countries in the American group. Certainly the capacity of the United Kingdom to assist by purchases from the countries of the American group is limited to what can be financed by means of United Kingdom exports or credits or payments agreements.

5. The survey of the problem which the United Kingdom Government is preparing has not been completed but it appears to them that different remedies will have to be explored for various groups of commodities, which for this purpose would seem to fall in the following categories:—

(a) Some, e. g. wheat,⁸⁴ cotton,⁸⁵ maize, sugar,⁸⁶ were pre-war problems though the difficulties have been accentuated by war conditions. Their scope is vast and it may be considered that they must in the main be dealt with by means of storage schemes financed by producing countries and accompanied by efforts to regulate production.

(b) Others, such as copper⁸⁷ and perhaps meat and meat products⁸⁸ might have to be dealt with by regulation agreements operated by industries or governments.

(c) A most acute problem is that of colonial products which cannot easily be stored or regulated or financed by the local governments and which have suffered most by loss of European markets. The United Kingdom Government are committed to supporting the economic situation in Allied as well as in British colonies and India. In these cases purchases seem to be the only method of helping or production must be discouraged by allowing prices to fall to a low level.

The United States and other American countries and the British Dominions are mainly concerned with (a) and (b) but the United Kingdom and its Allies are also deeply interested in (c).

6. Definite proposals on the wider objectives are still under examination by the United Kingdom Government but it appears to them that among the questions to which consideration will have to be given are:—

(a) What arrangements can best be made for the storage of existing surplus commodities both to ensure orderly marketing and to provide reserves for relief of Europe, when the time comes;

(b) How far storage can De financed locally by producing countries, and how far it would involve purchases or credits from other countries;

(c) What plans can be devised for dealing with the residue of existing surpluses;

(d) What steps can best be taken to alleviate the position (both as regards exports and imports) of producing countries, which find themselves owing to war conditions cut off from their normal markets;

(e) As regards the future, how far production of various surplus commodities in the various countries concerned can be planned or regulated so as to prevent as far as possible accumulation of fresh surpluses.

7. Where possible it would seem to His Majesty’s Government that such questions should be dealt with on an international basis and that where international organisations exist they should be called into action. The advisability might be considered of asking the chairmen of such bodies, e. g. of the Wheat Advisory Committee and International Sugar Council, to summon informal meetings to consider the possibilities of appropriate action in the international field. The possibility might also be considered of creating new international organisations where they do not exist, e. g. for oil seeds or fats.

III

8. Pending the full consideration by the United States and United Kingdom Governments, either independently or in consultation, of the problems of export surpluses in general and their possible remedies and of these wider objectives, it seems probable, and possibly inevitable, that the United States Government may take ad hoc measures in regard to particular surplus commodities of particular American countries as well as those of the United States itself, while the United Kingdom Government must take similar action to assist Empire and Allied countries, notably in respect of the commodities of category (c) of paragraph 5 of this memorandum. It would be unfortunate if the situation developed in such a way that ad hoc measures are devised on inconsistent lines by the United States for Western Hemisphere countries and by the United Kingdom Government for the British and Allied countries, as this would complicate not only the technical but the political problems involved.

9. It therefore appears to His Majesty’s Government that in the first instance it would be most useful and mutually advantageous if an exchange of information with the United States Government could be instituted and maintained in regard to the ad hoc measures which they have taken or may contemplate taking for dealing with particular export surpluses, especially agricultural surpluses, of the producing countries within the respective groups. If this proposal is acceptable to the United States Government, His Majesty’s Government for their part would be glad to arrange immediately for such an exchange, using either the American Embassy in London or the British Embassy in Washington as a channel of communication.

Washington , September 18, 1940.

80. For text of the aide-mémoire, see p. 42;memorandum “A” is printed supra.
81. See Department of State, Second Meeting of the Ministers of Foreign Affairs of the American Republics, Habana, July 21–80, 1940, Report of the Secretary of State (Washington, Government Printing Office, 1941), pp. 25 and 80.
82. See 54 Stat. 961.
83. See W. N. Medlicott, The Economic Blockade, vol. i (London, His Majesty’s Stationery Office, 1952), pp. 551 and 666.
84. See bracketed note regarding preliminary negotiations for a conference to conclude an international wheat agreement, Foreign Relations, 1939, vol. ii, p. 27.
85. For previous correspondence regarding international regulation of production and marketing of cotton, see ibid., pp. 20 ff.
86. For correspondence regarding arrangements for the wartime operation of the international sugar agreement, see ibid., vol. i, pp. 948 ff.
87. For correspondence concerning copper, see vol. ii, pp. 300 ff.
88. For scheme for an international beef conference to regulate the supply of beef to the United Kingdom market, January 1, 1937, see International Labour Office, Intergovernmental Commodity Control Agreements (Montreal, 1943), p. 69.