Foreign Relations of the United States: Diplomatic Papers, 1944, General: Economic and Social Matters, Volume II

840.50/8–2444

The British Minister ( Campbell ) to the Assistant Secretary of State ( Acheson )

Washington , 24 August, 1944.

My Dear Mr. Assistant Secretary: With reference to Mr. Marris’ letter of 10th May to Mr. Taft about economic policy towards the European Neutrals after the collapse of Germany, I am now writing to give you an outline of the results of preliminary consideration given to this problem in London.

The object of Anglo-American policy should, in His Majesty’s Government’s view, be to fit neutral trade into the general framework of arrangements which the Allies will have to construct in order to ensure an orderly change-over from wartime to peacetime trade after the defeat of Germany. So long as the neutrals remain outside that framework there will be a danger that, with the greater commercial freedom which they will gain when the blockade becomes less strict, they will use their resources of foreign exchange and shipping to stultify these arrangements to the disadvantage of the Allies. His Majesty’s Government are of the opinion therefore that any Anglo-American policy should endeavour:

(a) to provide comprehensively against all neutral economic activities calculated seriously to prejudice Allied arrangements in the transitional period, and

(b) to get maximum benefit out of neutral resources.

Although His Majesty’s Government agree that one of the first aims should be to secure cooperation of the neutrals with UNRRA,⁴ more than this is required and it is considered that a comprehensive Anglo-American policy should aim at securing the following objectives in relation to the European neutrals:

1. We should enter into some kind of supply-purchase agreement with each neutral, the main features being:

(a) Neutrals will agree to provide from their own territories or from their colonies certain goods required by the United Nations for war or other purposes; to satisfy their requirements wherever possible and appropriate from their own resources, and only when these are exhausted to draw upon United Nations’ resources; to make any of their metropolitan or colonial surpluses available if needed to the Allies; and to provide through traffic facilities for the civil supply requirements of the United Nations.

(b) Neutrals will limit to agreed figures and to agreed sources purchases of certain commodities in short supply of which the United Kingdom and United States do not control the entire supply and generally accept the advice of the Combined Boards⁵ or other appropriate agencies of the United States and the United Kingdom Governments.

(c) In return, the United Kingdom and the United States will agree to make available agreed quantities of commodities which they do control.

2. We should, subject to existing agreements, endeavor to oblige the neutrals to fulfil certain outstanding requirements of economic warfare. This is a matter of some urgency as problems may arise in an acute form at any moment with the European neutrals. In the case of Sweden and Switzerland, in particular, it might be possible to attain immediately important economic warfare objectives if Sweden could be offered supplies to cover the twelve months following the cessation of hostilities with Germany. Important objectives might also be secured if we could offer to supply Switzerland immediately the frontier is reopened.

3. We should persuade the neutrals to make a substantial payment to UNRRA funds or if this is not at first possible at least to make a considerable contribution to relief in an acceptable form.

If we could achieve these objectives, which might not entail negotiations over a very wide field of commodities, we should have gone a long way towards:

(a) preventing unchecked competition for available supplies which would jeopardise the Anglo-American position as well as that of the smaller European Allies;

(b) preventing a general rise in the price level of scarce commodities;

(c) reducing blockade quotas so that they are in fact equivalent to supply allocations instead of exceeding them, and providing for restrictions on neutral imports in the period when the blockade becomes less strict;

(d) merging war trade agreements into transitional period agreement;

(e) putting ourselves in a position to ensure that neutrals contribute substantially to European relief;

(f) in general, bringing the neutrals into the allocation system for goods in short supply and as far as possible regulating their standards in relation to those of liberated territory.

If the conception of agreements on the lines of paragraph 2 above is accepted the immediate task would be to formulate agreements for use in joint Anglo-American negotiations with each neutral. As soon as these were ready the Soviet Government might be informed generally of our intentions. His Majesty’s Government feel also that other European Allies, individually or collectively, should also be informed and invited to take any complementary action likely to be useful.

In completing arrangements on the above lines, certain financial considerations will have to be borne in mind. For instance, sterling held by European neutrals will not be available for purchases outside the sterling area, while the United Kingdom Government will wish to secure, as a quid pro quo for supplies made available, the withdrawal of the existing obligation to pay gold to certain of the European neutrals. There may also be points arising out of the application of United States freezing of neutrals of which account will have to be taken.

In view of the imminence of the problems under discussion and of the time which will be necessary to prepare for negotiations, we should welcome an early expression of the views of the Department. In the meantime, His Majesty’s Government are giving consideration to what should, in their view, be the substance of Anglo-American negotiations with each neutral.

Very sincerely yours

Ronald I. Campbell

4. United Nations Relief and Rehabilitation Administration; for documentation see Foreign Relations, 1943, vol. i. pp. 851 ff., and post, pp. 331 ff.
5. For information on the Combined Boards, see Department of State Bulletin, January 16, 1943, pp. 67–69; see also ante, pp. 16 ff., passim.