800.24/12–2344
Memorandum by Mr. Frank W. Fetter of the Division of Financial and Monetary Affairs66 to the Chief of the Division (Collado)
British Exports of Items Manufactured From Cash Purchase Materials in Short Supply in the United States
The Top Secret memorandum of November 25, 1944 on lend-lease to the British presented to the President by Mr. Stettinius, Mr. Morgenthau, and Mr. Crowley, the public statement of these three men on November 30, and Mr. Churchill’s statement of the same date in the House of Commons raise the question as to whether previous to V–E Day the British are to be permitted to export products embodying materials in short supply in the U.S. that have been purchased for cash.
The memorandum to the President states in 3—a, “No change in the present export policy to be made until V–E Day”. This language is clear and unequivocal, but the subsequent statement “Mr. Crowley has stated that he will go as far as practicably possible to make such administrative arrangements, under the terms of the White Paper, as [Page 85] will not hinder unduly certain minor British exports prior to V–E day” leaves some doubt as to what the net result is.
The press release of November 30 given by Mr. Stettinius, Mr. Morgenthau, and Mr. Crowley had the following statement in regard to the shift of some items from lend-lease to cash purchase:
“It is now expected that some raw and semi-fabricated materials, such as iron and steel, will no longer be provided by the United States to the United Kingdom under lend-lease after January 1, 1945. This will have the effect, under the terms of the White Paper itself, of removing products made from such materials from limitations that will continue to apply to articles received under lend-lease. Such materials no longer obtained under lend-lease will of course, be available to the United Kingdom in commercial exports only after the overriding considerations of war supply and war shipping are met.”
In the light of the memorandum to the President the exact meaning of this public statement is not clear. The sentence starting, “This will have the effect” appears to say that the White Paper restrictions no longer apply to cash purchase items, but this is directly contrary to the recommendations made by the same persons to the President. An alternative explanation is that iron and steel and the other items obtained under cash purchase are no longer in short supply, although this does not square with the facts on some types of steel products. The last sentence does not apply to the U.K.’s right to export, but to the U.S. policy on cash sales to the U.K. Strictly interpreted the passage says that the White Paper restrictions will not apply to any cash purchases from the United States, (either because the White Paper provision on this point has been repealed sub silentio, or because no items purchased for cash will be considered in short supply) but that the U.S. will make available materials to the U.K. on a cash basis “only after the overriding considerations of war supply and war shipping are met”. In other words the White Paper restrictions are lifted on cash purchase items, providing the U.K. can get them, but the U.S. will not furnish such items on a cash basis if they are in short supply. The question as to how the WPB67 in making allocations is to interpret “short supply” is the crux of the problem. An extreme view would be that an item was in “short supply” as long as demands by American exporters were not fully met, and that hence nothing would be available to U.K. for export purposes. A more reasonable view would be that “short supply” related to military and essential civilian needs, and that when those had been met some reasonable division would be made between the U.S. and the U.K. to take care of export needs.
Mr. Churchill’s statement in the House of Commons on the same date read as follows: [Page 86]
“Thus, from that date [January 1, 1945]68 we shall no longer receive shipments to this country under Lend-Lease, of any manufactured articles for civilian use which enter into our export trade nor of many raw and semi-fabricated materials such as iron, steel and some non-ferrous metals. Consequently, in accordance with the White Paper of September 1941, we shall then be free to export a wide range of goods made from these materials. Naturally, we have not used in exports and do not propose to use any critically scarce materials except where export is essential for the effective prosecution of the war.”
This statement implies that as far as the U.K. is concerned no restrictions are in effect after January 1, 1945 on the export of items purchased for cash or made from items purchased for cash, but that the U.K. will not use “critically scarce materials” in exports. What difference, if any, there is between “critically scarce materials” and “materials of a type the use of which is being restricted in the United States on the grounds of short supply” is not clear.
In summary, the memorandum to the President says that the cash purchase restrictions of the White Paper stand unchanged, but that the administration of the White Paper waivers will be changed. The statement to the press implies either that the White Paper restrictions on cash purchase items have been lifted, or that no cash purchase items are in short supply. The Prime Minister’s statement says that as far as a commitment to the United States is concerned there are now no restrictions on the use of cash purchase items in exports, but that the U.K. will not make exports that use material needed for war purposes.
The results in practice of the policy expressed by these somewhat conflicting statements will be determined largely by the action of FEA in the granting of White Paper waivers, and by the position of WPB on “short supply”.