Foreign Relations of the United States Diplomatic Papers, 1941, The British Commonwealth; The Near East and Africa, Volume III

840.48/4527⅛

The Assistant Secretary of State (Grady) to the Director General, British Ministry of Economic Warfare (Leith-Ross)³

Washington, January 2, 1941.

My Dear Leith-Ross: In the first place let me assure you that I received and read your letter of November 30⁴ with very great interest and have been giving it considerable thought, while at the same time during my recent absence from Washington, it has been receiving the attention of officers of Department’s staff who are most interested in the general problems covered.

2. On the whole, I find myself in cordial agreement with the general tenor and substance of your comment. The gravity of the surplus problem, both in its immediate aspects and its post-war probabilities, and the need for broad and long-range vision and planning to deal with it, are undeniable. I quite agree with your view that “the surpluses problem should be viewed as a great whole and as a collection of individual surpluses in particular countries.” A program of joint Anglo-American cooperation should manifestly serve to increase immeasurably the scope and potentialities of effective action, as contrasted with separate efforts.

3. Before commenting more specifically upon your views regarding methods, it might be useful were I to mention briefly the main aspects of our program of inter-American cooperation so far as they relate to the problem of surpluses, since the late Lord Lothian’s⁵ memoranda of July 3 and September 18⁶ appear to have been stimulated in some part by certain proposals of a very general nature discussed in connection with the Habana Conference of last July,⁷ and perhaps the impression conveyed by these proposals has been somewhat different from the actual facts. The original proposals themselves were of very general and broad nature; I think it fair to say that their main immediate effect has been to stimulate discussion and action along more limited and perhaps more realistic lines. As you know, the principal outcome of the Habana Conference, so far as commodity surplus problems were concerned, was a mandate to the Inter-American Financial and Economic Advisory Committee to carry on.⁸ As a result there has already emerged an agreement relating to coffee, with which you are by now doubtless familiar, and which is primarily, from the point of view of producers, an American problem; some work has been initiated also with reference to cocoa and to cotton,⁹ which of course present situations radically different from that of coffee in that the non-American production is so much more important in their cases. As you have doubtless been informed, steps of an informal nature have already been taken to keep your Embassy here informed of what is going on with respect to cocoa, and to provide a basis for cooperative endeavors, and I think I can say with complete confidence that the desirability of joint Anglo-American action, using the term American in its wide sense to include also the other American Republics, in any international scheme to deal with cocoa, is recognized.

A beginning in another direction has been made in connection with relief distribution of surpluses, or more specifically, the possibility of applying on an inter-American basis arrangements analogous to our domestic scheme for relief distribution of surplus commodities. In this also, however, only rudimentary progress has been made, and I am sure that nothing has been done which would provide any substantial conflict with, or obstacle to, the adoption of a program of joint Anglo-American cooperation.

4. So far as the financial aspect of our inter-American cooperation is concerned, you know of course that subsequent to the Habana Conference the Congress increased by five hundred million dollars the lending authority of the Export-Import Bank.¹⁰ The greater part—though not all—of this assistance is expected to be extended to Latin American countries. The policy thus far pursued in granting such credits has been to direct efforts toward the relief and remedy of the general situation rather than to buy up or to make loans directly against specific accumulations of surplus commodities. Credits have been advanced to the governments themselves to help meet the urgent necessities of their general foreign trade and exchange position and to stimulate and promote new activities designed to improve their general economic stability and their trade prospects with ourselves.

There has indeed been some purchasing and accumulation of stores of strategic materials,¹¹ but this is based on our defense program rather than as a specific remedy for the commodity surpluses problem.

5. Thus we have not, as yet at least, been using financial credits as a direct method of solution of the international surpluses problem in this hemisphere through purchase of or specific loan against particular commodity surpluses (as distinguished of course from our purely domestic surplus relief activities). I would not say, however, that the use of financial assistance as part of sound schemes for solution of international commodity surplus problems would be specifically precluded. The coffee agreement does indeed contain a provision stipulating the assistance of the Coffee Board in arranging financial assistance for the storage of coffee surpluses, but this does not commit the United States Government to the provision of such assistance. In connection with any consideration or planning with respect to this aspect of the question, it will certainly be necessary to avoid action which, as you say, would simply take existing surpluses off the hands of producing countries and leave them free to produce more surpluses. I therefore agree fully with your views that any assistance should involve their own internal cooperation and commitments and be part of reasonable sound arrangements to prevent further accumulation of surpluses.

6. I think you will see from the foregoing that our views, in the general approach, are very much in harmony, and that there have been no developments or action here which would in any substantial or serious way prevent or impede a program of joint cooperation between us. While of course the Governments of the other American Republics must be left to speak for themselves, I feel that certainly in concrete cases at least they would recognize the usefulness, if not the necessity of achieving a more substantial international basis through such joint action.

7. As regards the more specific methods discussed in your letter, here again I find no cause for substantial disagreement with you. In the light of our experience, I am inclined to believe that the most effective progress will be made at this time primarily through individual approach to particular commodities. Thus I would suggest continuing the efforts that have been initiated to deal with the cocoa problem, which seems to provide an especially significant instance for approaching the problem on a basis which includes both inter-American and Anglo-American cooperation. We may before long wish to suggest the initiation of parallel action with respect to cotton. Your suggestion that the international wheat committee be revived has been sympathetically regarded here, and I believe that a more definite proposal to this end would without question elicit a favorable response from us.¹²

8. At the same time there are two other lines along which some work might well be initiated in cooperation. I have in mind, on the one hand, an assembly of the pertinent facts, statistics, regarding each commodity which may be, or show prospects of being, a candidate for treatment as a surplus commodity problem. It would be well to be as forehanded as possible in this regard, because it so frequently happens that when a problem does need to be actively taken up, either there is delay while the facts necessary to a clear picture are being assembled, or action is initiated without a clear understanding of what the situation is and what is needed.

Secondly, I believe it would be useful at this time to undertake a review of the character of and experience under international commodity control schemes, whether governmental or otherwise, which have in the past been put into operation, and perhaps some of those which have reached a certain stage of agreement but failed to enter into effect.

In suggesting these lines of inquiry, I do not for a moment wish to seem to be detracting from the desirability of current action. On the contrary, such studies should in nowise be allowed to interfere with active endeavor on any specific commodities which are now the subject of consideration or which may for one reason or another be added to these.

9. This brings me, finally, to your suggestion of a joint general committee, which might be initiated on an Anglo-American basis as a means of taking the lead in this field, with a view to extension by adding representatives of other countries as the need and purpose develops. In principle I think your idea of such an agency, to formulate general lines of policy, to initiate action whenever appropriate, and perhaps to become a coordinating body for various committees on individual commodities, is well taken. Just what the constitution and terms of reference of such an agency might best be, however, perhaps ought to be left for further consideration in the light of developments along the lines of current or early activity on specific commodities and of studies of the nature I have suggested.

As you may perhaps already have learned when you receive this reply, I have resigned from my position as Assistant Secretary of State in order to take up the position of President of the American President Lines, one of our principal steamship companies operating principally from the West Coast. This does not mean at all that I shall be discontinuing my interest in these general problems of the international economic order with respect to which I have so much enjoyed our mutual discussions and collaboration. But of course in the circumstances further expression of this Government’s interest and views in the subject must be left to the Department. I have desired to take this opportunity to express my own views on the subject at some length, and you may be sure that your further comment will be welcomed here. Perhaps the most useful way to proceed for the time being, if agreeable to you, would be by concurrent exchanges of views through your Embassy here and our Embassy in London. I am accordingly sending this letter to our Embassy for delivery to you, as I know from their telegrams that they have been in touch with you on the subject; and Sir Owen Chalkley¹³ will be provided with a copy for the information of your people here.

With kind personal regards and the hope that we may meet again before very long, and under happier circumstances, I am

Sincerely yours,

Henry F. Grady

3. Transmitted through the American Embassy in London. Sir Frederick William Leith-Ross had been economic adviser to the British Government since 1932.
4. Foreign Relations, 1940, vol. iii, p. 138.
5. Former British Ambassador to the United States; he died in Washington, December 12, 1940.
6. Foreign Relations, 1940, vol. iii, pp. 134 and 135.
7. See Department of State, Second Meeting of the Ministers of Foreign Affairs of the American Republics, Habana, July 21–30, 1940, Report of the Secretary of State (Washington, Government Printing Office, 1941), p. 10.
8. See ibid., pp. 25 and 80.
9. In April 1941 representatives of the Department of State and the Department of Agriculture participated in informal conversations with officials of the British Embassy and with a representative of the Brazilian Government. The result of these conversations was the preparation of a memorandum outlining the possible bases for an international cotton agreement which was submitted to the cotton subcommittee of the Inter-American Financial and Economic Committee as a proposal of the United States. Correspondence not printed.
10. Act of September 26, 1940; 54 Stat. 961.
11. For correspondence concerning plans to acquire adequate stockpiles of strategic raw materials, see Foreign Relations, 1940, vol. ii, pp. 250 ff.
12. See correspondence regarding the participation of the United States in the International Wheat Meeting at Washington, July 1941–April 1942, vol. i, pp. 530 ff.
13. Commercial Counselor of the British Embassy.