841.24/742: Telegram
The Ambassador in the United Kingdom (Winant) to the Secretary of State
[Received September 7—10:25 p.m.]
4134. My 4133, September 7, 11 p.m. Following text of memorandum on export and distribution of lease-lend material received from Foreign Office together with draft exchange of letters.
“Memorandum.
1. All materials which we obtain under the Lend-Lease Act are required for the prosecution of the war effort. This principle governs all question of the distribution and use of such goods and His Majesty’s Government have taken and will continue to take action to secure that these goods are not in any case diverted to the furtherance of private interests.
Export Policy.
2. Lend-lease materials sent to this country have not been used for export and every effort will be made in the future to ensure that they are not used for export subject to the principle that where complete physical segregation of lend-lease materials is impracticable domestic consumption of the material in question shall be at least equal to the amounts received under Lend-Lease.
[Page 33]3. His Majesty’s Government have not applied and will not apply any materials similar to those supplied under Lend-Lease in such a way as to enable their exporters to enter new markets or to extend their export trade at the expense of United States exporters. Owing to the need to devote all available capacity and manpower to war production, the United Kingdom export trade is restricted to the irreducible minimum necessary to supply or obtain materials essential to the war effort.
4. For some time past, exports from the United Kingdom have been more and more confined to those essential (1) for the supply of vital requirements of oversea countries, particularly in the sterling empire; (2) for the acquisition of foreign exchange, particularly in the Western Hemisphere. His Majesty’s Government will not [sic] adopt the policy summarized below: (1) In future no materials of a type the use of which is being restricted in the United States on the grounds of short supply and of which we obtain supplies from the United States either by payment or on lend-lease terms will be used in exports with the exception of the following special cases: (a) material which is needed overseas in connection with supplies essential to the war effort for ourselves and our Allies, and which cannot be obtained from the United States. This would enable us (1) to export supplies essential to the war effort to countries within the Empire and to our Allies and (2) to export such articles as tinplate for canning to Portugal and the Argentine for our food requirements if such tinplate could not be supplied by the United States; (b) small quantities of such materials needed as minor though essential components of exports which otherwise are composed of materials not in short supply in the United States; (c) repair parts for British machinery and plant now in use and machinery and plant needed to complete installations now under construction, so long as they have already been contracted for. Steps will be taken forthwith to prevent the execution of existing contracts for the export (except to Empire and Allied territories) of such goods which do not come within the exceptions referred to in (a), (b) and (c) above. (2) Materials similar to those being provided under Lend-Lease which are not in short supply in the United States will not be used for export in quantities greater than those which we ourselves produce or buy from any source.
Distribution in the United Kingdom of Lend-Lease Goods.
5. The general principle followed in this matter is that the remuneration received by the distributors, whatever the method of distribution, is controlled and will be no more than a fair return for the services rendered in the work of distribution. The arrangements rigorously exclude any opportunity for a speculative profit by private interests from dealing in lend-lease goods. In most cases, lend-lease supplies will be distributed through organizations active as agents of His Majesty’s Government in the strict sense of the term and not as principals. Where for strong practical reasons this cannot be done, a full explanation will be supplied to the United States Administration and then concurrence sought beforehand in any alternative arrangements proposed. The justification for retaining existing channels of distribution operating under strict Government control, is that the creation of elaborate new organizations in their place would inevitably result in [Page 34] loss of efficiency and the wasteful use of manpower, and retard the war effort. In the distribution of lease-lend goods there will be no discrimination against United States firms.
6. Food is a special case. Only some 5 or 6 percent of the total British food supply will come from the United States, and, without great practical complications, it would be impossible to have a separate system for the distribution of lend-leased food. Food distribution is carried out in the United Kingdom by wholesalers, to whom the Government sells food as principals. In fact, the Ministry of Food has established a close control over all distributive margins so that neither the wholesalers nor the retailers receive any greater remuneration than is adequate to cover the cost of the services performed. No food obtained on lend-lease terms is or will be sold at uncontrolled prices. Thus, the general arrangements as regards the issue of lend-lease food fit into His Majesty’s Government’s policy of stabilizing the whole price level of foodstuffs, a policy to which the Government contributes 100 million pounds a year.
7. In some cases, direct free distribution is practicable and will be adopted. For example, some milk products (including lend-leased supplies from the United States) are distributed direct and free of charge to children and others in need through schools, clinics, and hospitals. The distribution is undertaken by state agencies and the cost of the distribution is borne by the Government.
8th September, 1941.”