811.20 Defense (M) Spain/692: Telegram

The Secretary of State to the Consul General at Algiers ( Wiley )

849. For Murphy. Following are views of Department and BEW concerning Iberian cross trade, having in mind BOC 315 of April 3; Algiers’ 642 of April 17, 671 of April 21, 700 of April 24 and 733 of April 28; Madrid’s 910 of April 14; and Lisbon’s 755, April 3 and 875, April 20.40

Every effort should be made to carry on the ad hoc trade referred to in Department’s no. 710 to Lisbon and 927 to Madrid (both of April 23), pending negotiation of the interim and long-range programs. Lisbon’s no. 875 emphasizes importance of this. This will not however be prolonged to a point where it might jeopardize the conclusion of formal commercial agreements.
Final approval of the commodities to be included in the long-term program cannot be given until
receipt of Algiers’ reply to comments on Bataille proposal contained in Department’s 766 of April 22. As soon as reply is received, steps will be taken here to reconcile Bataille proposal with program outlined in Department’s airmail instructions of March 16 and you will then be advised.
Agreement is reached with British here as to desirability of including shipments from French West Africa to the Peninsula in the proposed program.
Department and BEW consider that with one or two exceptions, Madrid’s no. 910 sets forth very desirable system for handling trade. However, in view of Algiers’ numbers 642 and 671, it does not appear that this system will be entirely acceptable to the French. The following paragraphs attempt to reconcile the various views as seen from here and to set forth our recommendations re procedure for negotiations and system for handling interim and long-range programs.
  • A. Type of goods to be included in programs. Department’s airgram instructions of March 16 suggested goods for interim program. Final views re goods to be included in long-term program will be sent as stated in paragraph 2 above.
  • B. Parties to and situs of negotiations. We understand that there are no objections to continuation of negotiations in Algiers between US, British and French representatives to the end that general agreement may be reached there as to scope of trade and means of implementation, having in mind the underlying objectives outlined in paragraph 1 of Department’s no. 48541 and in the airmail instructions of March 16. In this connection, Butterworth is being instructed to [Page 37] proceed immediately to Algiers with Wyndham White.42 We understand that both are now in Madrid. In accordance with request contained in Algiers’ no. 733, Butterworth is being advised by separate telegram that he shall be a member of the staff of NAEB while in Algiers.
  • Following general agreement in Algiers, negotiations with Spanish and Portuguese should be held in Madrid and Lisbon respectively. Department considers it essential that US and British representatives participate with the French in those discussions. Only in this manner can we be assured of properly correlating our joint supply-purchase programs in Spain and Portugal with the cross trade and coordinating the movement of goods through the blockade. Will Algiers please emphasize these points in course of negotiations with the French, pointing out that we have no desire to interfere with French prerogatives nor to deny French a position of respect and also pointing out that neither Americans nor British negotiate independently with the Spanish and Portuguese on matters of joint interest. It is not at all a matter of subordinating the French negotiators to ours but simply of attaining common Allied objectives through joint Allied negotiations, all of the parties thereto being equal partners.
  • With respect to the personality of Pettit, the solution proposed in Algiers’ no. 700 would appear to be satisfactory.
  • C. Vehicle for carrying on trade. We should much prefer to have the trade handled by the USCC and UKCC, but in light of views expressed in Algiers’ no. 642, it would be satisfactory if it is handled through an official French corporation provided it acts in close liaison with the UKCC and USCC. If it should be decided that the USCC and UKCC shall handle the trade, further consideration will have to be given to the mechanics of their operations.
  • D. Supervision of trade. Regardless of the vehicle decided upon for actually carrying on the trade, we consider it important that the suggestion made in paragraph 1 of Madrid’s no. 910 for its general direction be followed. That is, the Anglo-American Committees in Madrid and Lisbon should have sub-committees composed of US, British and French representatives, through whom all questions arising in connection with cross trade can be cleared and NAEB should establish some method of clearing such questions in Algiers with the French.
  • E. Finance. It will presumably be necessary to set up escudo-franc and peseta-franc accounts. In all probability the balances will run in favor of Spain and Portugal. However, if the balances should [Page 38] in fact be in favor of French North Africa, it is hoped that some informal understanding can be reached with the French to the effect that, subject to provision being made for prior purchases of agreed lists of civilian supplies for North Africa, the French might place orders on US and UK account at the request of NAEB. These orders could be placed either through the Commercial Companies or through the French Corporation, if that is used. It would doubtless be necessary to assure the French that no such request would be pressed by us or the British if by so doing pesetas or escudos will be absorbed beyond the resources of the cross trade accounts or to an extent which would jeopardize the procurement of the agreed list of French civilian purchases in the Peninsula. If it should develop that the US and UK authorities in North Africa should wish to make purchases in the Peninsula which could not be cared for by the escudo and peseta balances in the cross trade accounts, then we should like to have the French agree that purchases could be made if we should provide the necessary pesetas or escudos. If the French would agree to some such formula it would have the advantage (a) of providing a means of mopping up any surplus pesetas or escudos in the cross trade accounts and (b) of cloaking Army purchases.
  • It is assumed that in setting up cross trade accounts, every effort will be made to utilize to the greatest extent possible the peseta and escudo balances presently standing to the credit of the French.
  • F. Army supplies. In addition to the possible use of the cross trade accounts for army purchases, you may wish to consider desirability of seeking agreements with Spaniards and Portuguese to permit army purchases against dollars or sterling entirely outside of our cross trade framework. Possible objection to this course, however, is set forth in Lisbon’s no. 875.
  • G. Form of agreement. Madrid’s no. 910 and Lisbon’s no. 755 indicate that no formal agreements should be sought. We do not consider it necessary that there be a signed agreement, but we think it essential that a long-range program be agreed upon. The continuation of an ad hoc arrangement will result in the dissipation of our basic trading weapon, phosphates, which, if we are to obtain maximum success in our economic warfare objectives, can best be employed by coming to a definite understanding as promptly as possible.
It is of course impossible from this distance to assess all of the many factors to be considered in the negotiations of the cross trade agreements, and consequently we do not wish to attempt to give particularized instructions. Our negotiators will be generally familiar with the views in Washington and should be governed accordingly. The foregoing views are intended to highlight the points which we consider important and to express our views as to the most desirable [Page 39] solutions. Various modifications will be necessary and many details will have to be agreed upon which we have not attempted to cover. The negotiators are not expected to clear all minor modifications or questions of detail with Washington. However, if substantial problems are raised which are counter to the views held here, it is expected that they will be cleared with Washington before any commitments are made. In any event, before final commitments are made, you should of course clear entire program with Washington.

Please repeat to Madrid and Lisbon as Department’s nos. 993 and 777 respectively.

Repeated to London from here as Department’s no. 2777.

  1. Telegrams Nos. BOC 315, 700, 733, 755 and 875 not printed.
  2. Dated March 18, 11 a.m., p. 23.
  3. E. Wyndham White, First Secretary of British Embassy and British representative to NAEB.