561.311F1 Advisory Committee/1071: Telegram

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

797. Your 547, February 12, 9 p.m. I transmitted your instructions personally to the Foreign Secretary and have subsequently obtained further information on the attitude of the Treasury as well as the Foreign Office. Appreciation has been generally expressed of the spirit in which the latest proposals have been made, but several points of detail have been raised.

The first point is concerned with the definition of the phrase “termination of hostilities”. This phrase has caused much difficulty to the Foreign Office in connection with other documents. Henderson4 in the Treasury proposes to consider hostilities terminated when large-scale trading with the European continent is resumed. This is simply a question of an exact definition.

The second point is concerned with the price provisions. The British are making wartime purchases of wheat from Canada by bulk contracts and it is pointed out that either there might be no imports of wheat in the 30 days period suggested, or the imports might have to do with more than one previous contract, in which case the price might be less favorable for us then if we took the last contract price.

The Treasury therefore suggested that the last contract price with Canada be taken instead of the 30–day average. However, the Ministry of Food objected that this would prejudice their negotiations with Canada for the next wheat contract by encouraging Canadian farmers to press for higher prices which just now would be difficult to resist on account of the large gifts made by Canada to Great Britain.

To meet this, Henderson considered the idea of taking the price of the latest contract already made with Canada as the basis, and providing for adjustments along the lines of points (a), (b), (c) of the draft convention. He was, however, hesitant about putting this forward in case the naming of an exact price at present levels would antagonize American farmers who might be expecting higher prices. Conversations [Page 505] with both Henderson and Keynes5 indicate they are confident that they can get the Ministry of Food to accept the last contract price as the basis.

A third point that raised some questioning is the provision for taking the average rates of exchange prevailing in the 30 days.

It was thought that if some time elapsed before another wheat conference took place this might cause relative prices in exporting combines to get out of line and create political difficulties. They seem to have had Argentina in mind in particular.

The Foreign Office position was noncommittal. Their economist was not personally in favor of having any fixed price arrangement of one commodity until general postwar arrangements had been settled. But I believe that subsequent informal conversations with Treasury economists and private representations from them that a speedy settlement would be highly appreciated in Washington will meet with a good response. They seem likely to result in Keynes and Henderson strongly backing a settlement on lines of the “memorandum of agreement “with a few modifications designed to make definitions more precise.

When the British reply is received will you please let me know promptly if I can assist further at this end?

Please treat this information confidentially.

Winant
  1. Sir Hubert D. Henderson, Economic Adviser, British Treasury.
  2. John Maynard Keynes, Economic Adviser to the British Government.