840.50/3500: Telegram

The Ambassador in the United Kingdom ( Winant ) to the Secretary of State

1026. For those concerned with Article VII discussions. This telegram continues the series included in Embassy’s 56, January 4, 106, January 5 and 491, January 19:

Talks With Dominions. Ronald16 indicated recently that these would probably take place about the last week in February.

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State Trading. The principles of state trading may be important in relation to British imports after the war and possibly in relation to some reestablished or newly established governments on the continent of Europe. Some British economists in Government stress that the subject should not be considered as if the Soviet Union were the only important case involved.

The future of the Ministry of Food has been discussed from time to time in Government circles and with it the question of bulk purchasing of food imports under Government direction or control. It appears certain that the Ministry will continue some time after the war and probable that it will continue permanently. Bulk purchasing contracts will not now be made that go beyond 1946 or 1947 since the long term policy is still undecided and will be formed by the Cabinet on the basis of political considerations. Certain commitments to domestic farmers will probably cover the same period since it would be politically impracticable to give guaranteed prices for the products of farmers overseas without doing the same for farmers at home. While the Ministry of Food is likely to be established on a permanent basis the forces opposed to continuance of state trading beyond the transition period seem likely in the present Government to outweigh those in favor of it. If the war ends this year, however, bulk purchasing under present commitments will continue for about 2 years and ultimate policy may be determined by a differently constituted Government from the present one.

There are considerable differences of opinion in Parliament and among both permanent and temporary civil servants on bulk purchasing of certain imports in peacetime under Government direction. Commercial importing interests of course oppose state trading. A number of temporary civil servants in the Ministry of Food and the raw material controls were drawn from the trades concerned and many of them oppose continuance of Government trading operations and controls after the immediate post-war transition. Even among this group there are individual exceptions. The economists are not wholly in agreement on the subject. Information on the individual positions of some of them will be sent in a later message.

In the course of internal civil service discussions those opposed to bulk purchasing under Government control use as one of their objections the argument that the United States would be opposed to such forms of trading. This argument, particularly when used by those considered to be influenced by private commercial interests, adds to the feeling among some of the British tendencies that the United States will be a drag on post-war social change. Congressional utterances and actions and stress in American public utterances on the virtues of private enterprise have led to suspicion of future American [Page 9] policy among many in liberal and labor and even left wing conservative circles. In international trade questions, the issue is somewhat clouded by lack of a clearly conceived progressive policy and failure to grasp the importance of reconciling planning with an advantageous territorial division of labor.

At the technical level, work on internal commodity questions has been distributed as follows: Foods are in the hands of the Ministry of Food, not of the Ministry of Agriculture. The Ministry of Food insisted strongly on this arrangement. Minerals are dealt with by the Ministry of Supply and by the raw material controls some of which are attached to the Ministry of Supply. The Ministry of Agriculture has designated some of its economic staff to examine the relation of Article VII talks to domestic agricultural policy. For this purpose P. Lamartine Yates and Mrs. Holland have been brought into the Ministry under Enfield.17

Yates in a personal conversation referred recently to the joint statement on state trading (made after the Washington talks), paragraph 9,18 in which two criteria are formulated to assist in determining whether in any given case protectionism under state trading exceeded the maximum allowed under tariff agreements. He thought the first criterion was useful but was unable to attach any clear meaning to the second, which is put in the form of a question “whether the monopoly was satisfying the full domestic demand for the foreign products”.

Yates is personally in favor of a limit on subsidies and mentioned a suggestion that it might be fixed at a level that did not raise domestic prices by more than 25 percent above the “world” level. However, in further conversation he spoke favorably of “indirect” subsidies for certain products. Such subsidies are opposed by most of the British economists.

State trading is being studied by some of the British technicians concerned with food and agriculture from the point of view of the problem of offsetting fluctuations in world prices. They are considering the advisability of bulk state purchase of imports accompanied by guaranteed domestic prices of the product. This would involve some degree of stabilization to offset world fluctuations. Subsidies might be used for welfare purposes in support of a policy to guarantee to the consumer certain basic foods at prices within the reach of the low income groups, or to maintain guaranteed prices to domestic producers of certain products in the event of sharp fluctuations in world prices. In general there is a feeling that much more work needs [Page 10] to be done to distinguish between the use of subsidies for purposes of stabilization and their use for protectionist purposes.

  1. Nigel Bruce Ronald, British Assistant Under Secretary of State for Foreign Affairs.
  2. R. R. Enfield, Principal Assistant Secretary, British Ministry of Agriculture and Fisheries.
  3. See telegram 1316, December 2, 1943, 2 p.m., to Moscow, item VI d, paragraphs 4 (a) and (b), Foreign Relations, 1943, vol. i, pp. 1119, 1123.