Memorandum of Conversation, by the Assistant Secretary of State (Acheson)

Sir Girja called at his request. He asked me whether I had as yet had an opportunity to discuss with my associates in the Department the informal and oral suggestion made by him that this country and the Government of India enter into a reciprocal aid agreement patterned on the Australian and New Zealand agreements, but differing therefrom in that there would be a provision that reverse lend-lease in India should not exceed direct lend-lease from the United States to India, and another provision either limiting Article VII or referring to an exchange of notes which should in some way indicate that the freedom of the Government of India to protect certain of its industries by tariff was not abrogated.

I told Sir Girja that I had had such a discussion with certain officers of the Department; that the matter had not as yet been referred to the Secretary of State for decision; and that I assumed that, since he had raised the matter informally, he did not wish a formal decision on the matter, but merely wished to get the views of those officers who would be called upon to advise the Secretary. He said that this was correct and that he did not believe that his Government wished to raise the matter formally or to have a formal decision.

[Page 262]

I then said that, from our discussions within the Department and with officers of the Lend-Lease Administration, I believe that it was regarded as most inadvisable to have any agreement which would limit the return aid from India to the exact amount furnished by the United States. This was contrary to all the arrangements which had been made with other countries and to the spirit and purpose of the Lend-Lease Act. It would also produce, obviously, criticisms in the United States. He agreed with this and stated that he believed that his Government would not insist upon this provision.

I then said that all of us believed it most inadvisable to exclude Article VII from any agreement with India. This Article was regarded as most important from our point of view, and it would obviously raise difficulties with other countries if it were excluded from the agreement with India. I then pointed out that any exchange of notes in which it was recited that Article VII did not impair the fiscal sovereignty of either signatory power would also create difficulties. In the first place, no provisions in Article VII undertook to limit the sovereignty of any nation. To recite this obvious fact would raise questions both here and abroad as to the meaning and effect of Article VII. I saw no reason why India should find any greater difficulty in that Article than had been found by other nations.

Sir Girja drew my attention to an article in the New York Times 20 reporting resolutions passed by the Federation of Industries in India which had insisted that India must preserve its fiscal independence and not make commitments in return for lend-lease aid which would embarrass its future development. He said that it was against criticisms of this sort that the Government of India wished to guard. After some further discussion of this point along similar lines, I pointed out that the present situation was about as follows:

Lend-lease aid was being given to India by retransfer through the British. India was furnishing some reverse lend-lease aid but not in amounts or by methods which seemed to us adequate in view of the needs of our forces. The Government of India had proposed an agreement with conditions which seemed impossible for us to accept. Perhaps, therefore, the best method of procedure was to leave the situation as it was without involving ourselves in the difficulties which the attempt to make an agreement might create, and to work upon practical procedures by which the lend-lease materials sent to India should be those most essentially required for the war effort and by which the Indian Government and the British Government would work out between them methods of increasing the assistance furnished to our forces in India.

Sir Girja expressed the opinion that this appeared to be the most satisfactory course to pursue and said that he would consult his Government [Page 263] in regard to it. I impressed upon him the fact that this Government was entirely willing to enter into an agreement with ‘India along the lines pursued with other countries and that, if he wished to present proposed limitations to such an agreement, I should be glad to have them brought to the attention of the Secretary for decision, but I could not offer encouragement that they would be accepted.

Sir Girja then asked me if I could obtain for him illustrations of ways in which reverse lend-lease aid could be made more effectively to our troops. I said that I should be glad to do this and to discuss the matter with Army and Lend-Lease authorities.

Dean Acheson
  1. March 29, 1943, p. 5.