841.24/820
Memorandum of Conversation, by the Assistant Secretary of State (Acheson)
Mr. Keynes called at my request in accordance with the instructions of the Acting Secretary. I handed Mr. Keynes a copy of the draft proposal20 for a temporary lease-lend agreement which had been approved by the President and told Mr. Keynes that the President saw no reason why he should change his plans, which contemplated flying [Page 11] to England on Tuesday, July 29. I also told him that the President did not regard the draft as final on his part, but that he had given his approval for a discussion of it with the British Government as a basis for a temporary lease-lend agreement.
Mr. Keynes, after reading the draft, inquired whether Article II meant that the United States might require the British to furnish articles, such as tin, rubber, etc., without payment. I replied that Article II was inserted to provide for reciprocal action on the part of Great Britain to the extent that Great Britain might be in a position to take such reciprocal action and in the event that the necessities of our national defense might require us to ask for it; that it did not imply any present intention on the part of this Government to alter existing arrangements, but that no one could foresee the future and that, if the necessities of the future required us to request action by the British comparable to our own lease-lend procedure, Article II meant that the British would take such action, just as we were now taking it, so far as they were in a position to do so.
Mr. Keynes then turned to Article V which requires the United Kingdom to return at the end of the emergency such articles as have not been destroyed, lost, or consumed, and which the President may request to be returned. He pointed out that in his draft the obligation to return had been “so far as practicable”, and stated that this phrase had been inserted to cover the situation in which the United Kingdom, with the permission of the President, might have transferred to another Government lease-lend articles, thus placing them beyond the control of the British Government. I replied that this situation might be taken care of at the time of such transfer in one of two ways. Either the President’s permission might exempt such articles from the provisions of Article V, or the terms of the transfer might provide that the transferee Government should return them to the United States under the same conditions as provided in Article V. He seemed satisfied with this.
Mr. Keynes then raised Article VII, and stated that very serious considerations were raised by the provision that the final settlement should provide against discrimination in either the United Kingdom or the United States against the importation of any product originating in the other country. He asked whether this provision raised the question of imperial preferences and exchange and other trade controls in the post-war period. I said that it did raise these questions, but that the Article was drawn so as not to impose unilateral obligations, but rather to require the two countries in the final settlement to review all such questions and to work out to the best of their ability provisions which would obviate discriminatory and nationalistic practices and would lead instead to cooperative action in preventing such practices.
[Page 12]Mr. Keynes then spoke for some time quite strongly about this provision. He said that he did not see how the British could make such a commitment in good faith; that it would require an imperial conference and that it saddled upon the future an ironclad formula from the Nineteenth Century. He said that it contemplated the impossible and hopeless task of returning to a gold standard where international trade was controlled by mechanical monetary devices and which had proved completely futile. He said that the only hope of the future was to maintain economies in balance without great excesses of either exports or imports, and that this could be only through exchange controls, which Article VII seemed to ban.
He went on to say that the language used in Article VII had a long history; that it permitted all sorts of cunningly devised tariffs, which were in fact discriminatory and prohibited sound economic monetary controls. Finally, he said that at the end of the war we will probably have a great excess of exports, the British would require a considerable excess of imports, and that the formula provided in Article VII was wholly impossible.
I replied to Mr. Keynes that I thought he was taking an extreme and unjustified position and that it must be clear to him that no one would be less likely to impose a rigid and unworkable formula upon future developments than the President.
I said, and Mr. Keynes agreed, that the proposal made by him had been wholly impossible, inasmuch as it provided merely that lease-lend aid should be extended; that the British should return what was practicable for them to return; that no obligation should be created; and that they would be glad to talk about other matters. I pointed out to him that such a proposal could not possibly be defended in this country. To this he did not demur.
I then said that the purpose of Article VII was to provide a commitment which it should not be hard for the British to give that, after the emergency was over and after they had received vast aid from this country, they would not regard themselves as free to take any measures they chose directed against trade of this country but would work out in cooperation with this country measures which would eliminate discrimination and would provide for mutually fair and advantageous relations. I added that there was nothing narrow or technical about the provisions of Article VII, but that the British should realize that an effort of the magnitude of the lease-lend program on our part imposed upon them the obligation of continuing good will in working out plans for the future and that they must consider our position as well as their own during that future period.
After some further discussion along these lines, Mr. Keynes stated that he would take the proposal back to London and would discuss [Page 13] it there, and said that the British Government might propose some alteration in the language or might wish to have some further clarification on the Article.
He then said that there was considerable difference of opinion in London about future courses. There were some who believed that Great Britain should return to a free trade policy; there was a middle group, among whom he classified himself, who believed in the use of control mechanisms; and there was a third group who leant toward imperial policies. I said that I realized this and that we hoped that in his discussion of the Article he would not take a narrow or technical view regarding the language as a draftsman’s product, to be carefully analyzed in order to see what might or might not be done under it, but would try to direct attention to its major purpose and attempt to get agreement in order that the major purpose should be achieved.
At the end of our talk he seemed more reconciled to the Article, but by no means wholly so. He insisted that he agreed with the broad purpose and believed that it could be worked out.
- See annex.↩