800.24/1013
Memorandum of Conversation, by the Assistant Secretary of State (Acheson)
| Participants: | Sir Frederick Phillips |
| Mr. Redvers Opie, Counselor, The British Embassy | |
| Mr. Stettinius, Lend-Lease Administrator | |
| Dr. Feis74 | |
| Mr. Acheson |
Sir Frederick Phillips and Mr. Opie called at their request. They had previously asked me to invite Mr. Stettinius to be present. They referred to a conversation between the British Ambassador and Mr. Harry Hopkins,75 in which the latter had strongly urged the importance of the British Government’s extending its reciprocal lend-lease to the raw materials which were imported from the British Empire to the United States under public purchase. These materials amounted to about $200,000,000 a year. Sir Frederick wished to state, as he had already stated to the Treasury which had also made this request to him, the reasons why the British Government found difficulty in acceding to it.
He said that, while the dollar and gold assets of the United Kingdom had grown since the inauguration of the lend-lease program to a point where at the end of 1943 they would amount to approximately $1,000,000 [$1,000,000,000?] with certain deductions which the British Treasury felt necessary to make to meet liabilities for gold payments, the British current liabilities to other parts of the world would increase during 1943 at the rate of $3,200,000,000. Against these liabilities, the British Treasury concluded that it had quickly realizable securities in the amount of $600,000,000. This left the net increase in their liabilities at $2,600,000,000.
The British Treasury felt that there was imminent danger of a refusal of its other creditors to accept a substantial sterling balance unless one of two courses were followed. The first was to use a part of the million-dollar [billion-dollar] gold and dollar assets to make payments on account. The second was to permit those balances to [Page 56] accumulate as a reserve against which such payments might be made when needed. For this reason the British Treasury was very hesitant about agreeing to pay in sterling for the public purchases of raw materials made by this country, since to do so would both increase its sterling liabilities and decrease the accumulation of gold and dollar assets.
Mr. Stettinius and Mr. Acheson explained that in the discussions which they have had with the members of the Congress during the legislation for the extension of lend-lease and during the hearings upon the recent appropriation for lend-lease, the question of payment by the United States for the raw materials purchased by this Government had been repeatedly raised. They explained that the general principle of pooling materials for the conduct of the war was one which the Congress was willing to accept. They explained the highly favorable impression which was made upon the Congress by the extent of the British reciprocal lend-lease to the United States. They explained further that our payment for the imported raw materials purchased by the Government was a matter which it was very difficult, if not impossible, for the Congress to understand. It seemed to the Congress a clear exception to the principle of pooling resources. It involved comparatively speaking a small amount and it continually distracted the attention of the members of Congress from the large amounts of assistance being given us by the British to the one instance where we are requested to pay for materials, part of which were returned to the British through lend-lease. Mr. Stettinius strongly urged that the political effect of the British transferring these materials under reverse lend-lease would far exceed the deleterious effects of the financial outlay and would greatly assist him in maintaining lend-lease assistance at a high level.
Further conversation revealed other grounds for Sir Frederick’s concern about this proposal. He asked whether, in the event that notwithstanding their requested action the British balance should continue to grow, this Government would apply continued pressure upon the British Government to keep them at or about the present balance. In other words, he seemed to regard the difficulties presented by the proposal as not limited to those rising from the proposal itself, but also from the point of view of the proposal as a first step in a continued policy of restricting the growth of British balances.
It was explained to Sir Frederick that there undoubtedly would be continued pressure of the sort mentioned by him under the circumstances mentioned by him. But it was also pointed out that, in considering what steps could or should be taken in regard to the growth of the British balance, it would make a great deal of difference whether or not this country was contributing directly to that growth by the purchase of essential imports and whether or not the [Page 57] British Government was doing everything in its power to furnish reciprocal aid to the United States. In other words, it was made clear to him that no commitment could be made regarding future action but also that, if the balance were increased by our payments for public purchases, the pressure for some sort of reduction of lend-lease would be almost irresistible.
Sir Frederick inquired as to the amounts involved in public purchases, and Mr. Stettinius undertook to provide him with a list. Sir Frederick and Mr. Opie said that they were departing shortly for London where they would discuss this matter with the Chancellor, and that they believed that the discussion had been clarifying and helpful.
Sir Frederick informed us that he had been discussing with the Treasury the matter of British and probably ourselves selling gold in the Middle East as a means of combatting inflation and bringing materials out of hoarding. He also mentioned the British request to the Treasury for silver and lend-lease for India.76 These requests amount to four million ounces a month for coinage and 100 million ounces as a reserve for sale upon the market in India in the event the price of silver should threaten to get out of hand. This matter is dormant in the Treasury at the time being, pending the action of Congress upon the so-called Green bill.77
- Herbert Feis, Adviser on International Economic Affairs.↩
- Special Assistant to President Roosevelt.↩
- For correspondence concerning lend-lease aid to India and reciprocal aid, see vol. iv, pp. 246 ff.↩
- Reference is to S. 35 introduced on January 7, 1943, by Senator Theodore F. Green of Rhode Island. After emendation in the Senate it passed both Houses of Congress, received Presidential approval on July 12, 1943, and became Public Law 137, an Act to authorize the use for war purposes of silver held or owned by the United States; 57 Stat. 520.↩