841.24/9–1644: Airgram
The Secretary of State to the Ambassador in the United Kingdom (Winant)
A–1843. At the President’s request I am repeating to you herein a memorandum to me from the President dated September 15, 1944:22
“We have discussed the question of the scope and scale of mutual Lend-Lease aid between the United States and the British Empire after the defeat of Germany and during the war with Japan. We have agreed that a temporary joint Committee shall be set up to consider this question. Among American membership would be Stettinius, Morgenthau and Crowley. British members not yet chosen.
“The Committee will agree and recommend to the Heads of their respective Governments the amount of mutual aid in Munitions, non-munitions and services which is to be provided for the most effective prosecution of the war. The Committee is instructed to obtain from the various branches of the Governments whatever pertinent information is necessary for the preparation of their recommendation.
“Pending the recommendations of the Committee to the Heads of the respective governments, the appropriate departments of each government shall be instructed not to make any major decision with respect to the programmes of Lend-Lease aid for the period referred to above without the approval of the Committee.
“In reaching its conclusions the Committee will be guided by the conversation between the President and Prime Minister on September 14, 1944.
“Would you be good enough to let the Secretary of War and Ambassador Winant know about this?”23
The following is the record of a conversation between the President and the Prime Minister on September 14:
“The Prime Minister said that when Germany was overcome there would be a measure of redistribution of effort in both countries. He hoped that the President would agree that during the war with Japan we should continue to get food, snipping, etc. from the United States to cover our reasonable needs. The President indicated assent.
“He hoped also that the President would agree that it would be proper for Lend-Lease munitions to continue on a proportional basis even though this would enable the United Kingdom to set free labour for re-building, exports, etc., e.g. if British munitions production were cut to three-fifths, U.S. assistance should also fall to three-fifths. The President indicated assent. Mr. Morgenthau however, suggested that it would be better to have definite figures. He understood that munitions assistance required had been calculated by the British at [Page 59] about 3.5 billion dollars in the first year on the basis of the strategy envisaged before the Octagon Conference.24 The exact needs would have to be recalculated in the light of decisions on military matters reached at the conference. The non-munitions requirements had been put at 3 billion dollars gross against which a considerable amount would be set off for reverse Lend-Lease. The President agreed that it would be better to work on figures like these than on a proportional basis.
“The Prime Minister emphasized that all these supplies would be on Lease-Lend. The President said this would naturally be so.
“The Prime Minister pointed out that if the United Kingdom was once more to pay its way it was essential that the export trade, which had shrunk to a very small fraction, should be re-established. Naturally no articles obtained on Lend-Lease or identical thereto would be exported or sold for profit;25 but it was essential that the United States should not attach any conditions to supplies delivered to Britain on Lend-Lease which would jeopardize the recovery of her export trade. The President thought this would be proper.
“To implement these decisions the Prime Minister suggested there should be a joint committee. It was held that it would be better to appoint an ad hoc committee for this purpose on an informal basis in the first instance which could be formalized in due course. Pending its report the United States Departments should be instructed not to take action which would prejudge the Committee’s conclusions, e.g., production should not be closed down without reference to Lend-Lease supplies which it might be held should be supplied to Britain.”
I have sent the following memorandum to the President under date of September 17:
“I note from your record of conversation with the Prime Minister on September 14, 1944 that lend-lease aid during the war with Japan will exceed, in food, shipping, et cetera, the strategic needs of Great Britain in carrying on that war and will, to that extent, be devoted to maintaining British economy. Would it not be well to make clear to the Prime Minister at this time that one of the primary considerations of the Committee, in determining the extent to which lend-lease might exceed direct strategic needs, would be the soundness of the course adopted by the British Government with a view to restoring its own economy, particularly with regard to measures taken to restore the flow of international trade? My thought on this, which applies to financial assistance through lend-lease or in other forms, is developed [Page 60] in the last enclosure, of which a copy is attached, to my memorandum to you of September 8, 1944.”
The pertinent enclosure to my memorandum to the President of September 8 read as follows:
“There are growing indications that the British Government contemplates approaching us concerning the seriousness of their financial situation. At one time they contemplated sending Sir John Anderson, Chancellor of the Exchequer, to Washington for this purpose. It is understood, however, that they have decided to defer Anderson’s visit for several months. The Prime Minister may possibly raise this question with you at your forthcoming meeting.
“It seems to me that it is in the interests of the people of the United States that we extend such credits and other financial assistance to the United Kingdom as may be necessary to reconstitute and restore what has traditionally been the largest market for American goods.
“At the same time it is of fundamental importance to the interests of the United States and to the establishment of the kind of economic conditions which we hope to see prevail in the post-war world that we not blindly grant credits to the United Kingdom without taking into consideration the kind of commercial policy and trade practices which it may adopt.
“The British may seek to take the position that unless wholly satisfactory financial arrangements are made for assisting them in meeting their admittedly serious balance-of-payments problems, they cannot pursue the liberal, multilateral trade policies we have advocated. That position would not be sound and we should not accept it.
“Our position should be that whatever the British balance-of-payments problems may be and to whatever extent they may receive our help in meeting them, those problems will in our view be less difficult in a world in which the United States and Britain take the leadership in bringing about the greatest possible expansion of international trade on a multilateral nondiscriminatory basis; that balance-of-payments problems will be more difficult to meet if bilateralistic practices on the German pattern, high tariffs, quotas and discriminations result in a scramble among nations for a diminishing volume of world trade.
“In brief, in dealing with the British in regard to financial and other economic problems, I believe our basic position should be that the trade policies we advocate are not something the British should do for us in return for our financial help, but that, irrespective of such help, liberal trade policies designed to bring about an expanding world trade are in Britain’s own interest.
“Obviously, therefore, we should not offer to extend generous credits to Great Britain at a low rate of interest in return for commitments regarding commercial policy and imperial preference (which we already have, in preliminary form, in the Basic Lend-Lease Agreement). The field for bargaining about these matters should be the narrow one of respective tariff concessions. It seems to me, however, that we may properly bear in mind that the United Kingdom will not be a good credit risk unless she embarks on a sound commercial policy.
“The discussion of trade policies which may take place with the [Page 61] British in the near future will be more fruitful from our standpoint, if there can be complete understanding on the above point before those discussions are undertaken.”
[For correspondence during the period September 20–29, 1944, relating to Phase II of Lend-Lease discussions and concern over the financial condition and policies of the United Kingdom, see Foreign Relations, The Conferences at Malta and Yalta, 1945, pages 134–141, 155.]
- This memorandum was sent by President Roosevelt from the Second Quebec Conference. It is based on a memorandum initialled by British Prime Minister Churchill and President Roosevelt at Quebec, September 14, 1944.↩
- Documents concerning the arrangements made at the Second Quebec Conference on lend-lease were transmitted to Secretary of War Henry L. Stimson on September 20, 1944 ( Foreign Relations, The Conferences at Malta and Yalta, 1945, p. 137).↩
- Code name for the Second Quebec Conference.↩
- The Foreign Economic Administrator (Crowley) in a letter of September 30 to the Secretary of the Treasury (Morgenthau), enclosed a memorandum which referred to the British White Paper of September 10, 1941 (printed in Department of State Bulletin, September 13, 1941, pp. 204–206), and pointed out that the White Paper did not provide that all commodities received under lend-lease should be distributed through government channels but that private channels would be used only when necessary and that, when used, the British Government would prevent private individuals from obtaining an unreasonable or spectacular profit. The memorandum stated that the words “sold for profit” should be interpreted in this sense. Mr. Crowley’s letter and the enclosed memorandum are contained in the official History of Lend Lease, Part II, Chapter II, Box 64, Document 62, Section I, No. 03, located in the Security Classified Records Area of the Central Services Division in the National Archives.↩