Memorandum by the Assistant Secretary of State (Acheson) to the Under Secretary of State (Welles)
Mr. Welles: I agree that the attached aide-mémoire52 raises the point which you wish to take up with Lord Halifax.53 In the application [Page 332]of this principle, the British may raise questions which you may wish to have in mind. Yesterday in a conversation with Sir Frederick Phillips54 he stressed the growing concern of the British Treasury on the increasing British sterling obligations, mentioning specifically obligations arising out of essential purchases in South America, chiefly in Argentina and Brazil. The British will probably be apprehensive if our proposal to them meant reducing the total amount of exports which they could make at this time and which were meant to reduce their sterling obligations. This does not mean that they cannot shift exports from one commodity to another; but even here there may be some difficulty since, for instance, recent cables indicate that they are reducing textile production in order to transfer workers to other industries.
I do not raise these considerations to suggest that the point that we are raising is not sound but merely to anticipate observations that Lord Halifax may make, the answer to which is that obviously in the application of principle considerable study and flexibility will be necessary.
I suggest also that the attached cable might be held up55 until a start has been made with the British in the discussion of their cooperative program in South America.