Foreign Relations of the United States: Diplomatic Papers, 1943, The British Commonwealth, Eastern Europe, the Far East, Volume III

841.24/2046b

Memorandum of Conversation, by Mr. Theodore C. Achilles of the Division of European Affairs

[ Washington ,] September 16, 1943.

Participants:	Sir David Waley, British Treasury;
	Mr. Opie, British Embassy;
	Mr. Hall, British Raw Materials Mission;
	Dr. White, Treasury;
	Mr. Knollenberg, OLLA;28
	Mr. Acheson;
	Mr. Roosevelt, A–A;29
	Mr. Achilles, Eu.

The British representatives called to discuss this Government’s aide-mémoire of August 18, 1943 concerning the provision of raw materials as reciprocal aid.

Sir David Waley said that the British War Cabinet heartily approved the principle of pooling resources and had been glad to agree in principle to the provision of raw materials as reciprocal aid. There were three points which he wished to mention in connection with our aide-mémoire.

• First was our statement that the list attached to Mr. Stettinius’ letter of June 26, 1943³⁰ should not be considered definitive but merely as indicating the scope of the program. This was entirely agreeable to the British Government.
• Second was the date upon which the arrangement would come into operation. The British Government was prepared to bring the arrangement into effect at the earliest practicable date.
• Third was the question of making the arrangement retroactive through payment by the British Government for raw materials delivered to the United States Government subsequent to July 1, 1943. He feared that this would not be practicable nor did he consider it consistent with the principle of pooling resources. British financial resources had been severely strained by essential war purchases in every part of the world except the North American continent. Citing Mr. Micawber’s³¹ views on the relation of assets and liabilities, he thought that living on overdrafts was regarded in this country as well as in England as not only perilous but not quite respectable and that Mr. Micawber would be amazed at the extent to which His Majesty’s Government was living on overdrafts at the present time. A document setting forth in detail the British Government’s financial position would be sent this afternoon to the Department, the Treasury and OLLA and he did not wish to go into the matter other than to say that the British Government’s liabilities were now some seven times its assets and were increasing five times as fast.

With regard to the procurement of raw materials deliveries as reciprocal aid, he thought the British Government would wish to follow in general the procedure followed by the Lend-Lease Administration, (i.e. to pass upon requisitions submitted by us). The British Government would endeavor to expedite action upon requests as sincerely as Lend-Lease had endeavored to do so. He nevertheless foresaw difficulties with the Office of Economic Warfare³² on this point.

Mr. Hall said that he would be glad to discuss procedure with the Office of Economic Warfare but that he anticipated a real difference in principle between the views of that organization and the British Government, The OEW would undoubtedly wish the British Government to provide funds and to leave the rest to OEW. The British Government would much prefer to procure the raw materials itself and transfer them to OEW.

Taking up Sir David’s second point Mr. Acheson inquired whether the British Government contemplated that the arrangement would apply to deliveries made after a fixed date or only to deliveries made under contracts concluded after such date. He pointed out that many existing contracts covered a long term. Sir David said that this would have to be worked out with OEW as various contracts might have to be altered or taken over by the British Government but that the latter would endeavor to get the arrangement actually working as rapidly as possible and certainly had no thought, after agreeing in principle, of nullifying the arrangement through providing materials only under contracts concluded at some time in the future. He thought that the problem should be approached in detail, rather than in principle, by the OEW and the Raw Materials Mission with a view to working out a mutually satisfactory arrangement.

Mr. White agreed and suggested that individual items be transferred to a reciprocal aid basis as rapidly as was found practicable without waiting for a fixed date, which was the practice followed when the United Kingdom began to furnish our forces reciprocal aid without waiting for signature of an agreement. Mr. Achilles supported this suggestion, pointing out that one of the reasons we had suggested July 1 rather than October 1 as the effective date of the arrangement was the psychological advantage of announcing that the program had been in effect for some time rather than that it would take effect at some time in the future. He also suggested the possibility of reconciling OEW’s natural desire to obtain the raw materials as rapidly as possible with the British Government’s fully understandable desire to have control over what was given as reciprocal aid by a system whereby OEW would continue to procure the materials under existing or new contracts but would file requisitions for means of payment for specific purchases against a fund to be set up by the British Government. Sir David observed that OEW had already anticipated some such an arrangement simply by not, paying for raw materials delivered in recent weeks.

Sir David said that the British Government had kept the Governments of the Dominions and of India informed of its correspondence with us but had not received their views. He believed that those Governments were waiting for requests from us. The British Government would be prepared to do everything it could to facilitate our obtaining raw materials from the Dominions and India but any bargaining power it might have in dealing with them would be destroyed if, in approaching those Governments, we were to intimate that they should look to the British Government to pay the bill. Conditions vary in the different countries. South Africa could undoubtedly meet the additional expenditure without difficulty. Australia would probably have difficulty and might look to the United Kingdom for at least partial reimbursement. In the case of India he thought that the Government of India would be able to meet a substantial part of the amount without budgetary or political difficulties but that it would look to the United Kingdom for some of it. Dr. White considered that any such arrangements between the United Kingdom and India or the Dominions was no concern of ours. Mr. Acheson referred to the delicacy of discussions with the Government of India concerning lend-lease and reciprocal aid in view of the marked lack of enthusiasm in India for either. He said that the Government of India had wished some written assurance that the amount of reciprocal aid would never exceed the amount of lend-lease aid and referred to the political difficulties which the existence of any such written agreement with any government would present. He nevertheless saw no harm in our advising the Government of India of the procurement program which we wished transferred to a reciprocal aid basis.

It was agreed that the Office of Economic Warfare and the British Raw Materials Mission should be requested to discuss, without delay, the actual procedural problems involved and that this Government would lay the matter before the Governments of the Dominions and of India in the near future. Further consideration would need to be given to the question of retroactive payment for deliveries made since July 1.

28. Bernhard Knollenberg, Senior Deputy Administrator, Office of Lend-Lease Administration.
29. Kermit Roosevelt, Jr., Assistant to the Assistant Secretary of State (Acheson).
30. Neither printed.
31. Wilkins Micawber, a character in the novel David Copperfield by Charles Dickens.
32. The Office of Economic Warfare (OEW) was established July 15, 1943; on September 25, 1943, it was absorbed into the newly organized Foreign Economic Administration, which took over its functions.