845.24/405
Memorandum by Mr. Calvin H. Oakes of the Division of Near Eastern Affairs
Reference is made to the proposed lend-lease agreement between India and the United States. Technical aspects of the matter have already been discussed by TA in its memoranda expressing disapproval of the proposal. NE6 feels that there are objections on political grounds to any such agreement. While in some Indian circles it would no doubt be viewed as a recognition of India’s approach to independent or quasi-independent status and hence would to that extent be pleasing, it is thought that there are other considerations which would contribute unfavorably to American-Indian understanding.
It is assumed that this Government would not be willing to enter into any such agreement on the basis of a materially modified Article VII, and failing any such concession on our part, it would be immediately and bitterly alleged that the United States and Great Britain had conspired to force upon India, through action of the existing unrepresentative Government in India, a tariff policy ruinous to India’s future industrial development. As the Indian industrialists are, as a group, among India’s most potent nationalists, and as that group has been vociferous in expressing suspicion of American intent towards India, it is felt that any such ground for complaint on their part would be highly undesirable at this time.
A second factor involved pertains to India’s insistence that any such agreement embody the provision that the value of goods given and services rendered to the United States shall not exceed the value of articles supplied by the United States. While it is assumed that reverse lend-lease from India is comparatively small at the present time, it would appear possible that at some future time the extent of reversed lend-lease in India might increase sufficiently to cause uncertainty in the Indian mind as to who was benefiting most. It may be that this Government would be willing to include such a provision. If it is not included, however, and if the question indicated above ever arises, resentment would be centered against the United States if a separate lend-lease agreement were in existence, while if reverse lend-lease is supplied under the agreement with Great Britain, resentment would probably be directed largely against that country.7