841.24/2181

The Secretary of State to the Foreign Economic Administrator ( Crowley )

My Dear Mr. Crowley: I have received your letter of December 7, 1943, on the subject of certain United States Government plants and facilities formerly owned by the British Government. As I understand it, the letter supports the proposal that we request the British to return to us as reciprocal aid sums of money, in dollars, which we have already paid them for these facilities under completed contracts, entered into upon our offers. The plants in question are among the munitions factories built in the United States pursuant to contracts made by the British Government before March 11, 1941, and were originally paid for by them.

Upon consideration, I regard such a proposal as unwise and unwarranted, for these reasons:

First, the repudiation of completed contracts seems to me most undesirable practice, both as a matter of ordinary business usage, and especially in the conduct of international relations. We purchased the plants in question after extended negotiation, under contracts fully authorized and solemnly entered into. The effect of the proposal would be to request the return of sums of money which we have already paid over according to our bargain. Other things being equal, I should regard such a request as putting our Government in an altogether unfortunate light in its dealings with the British Government.

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Secondly, the plan of repaying us for these plants would call for a small dollar credit on the lend-lease records. It is thus in fact a proposal for piecemeal cash payment for lend-lease assistance we have given Great Britain. This is something quite different from reciprocal aid. In this sense, too, the proposal seems to me unsound. The policy of this Government on the question of ultimate lend-lease settlement was clearly stated in the Master Lend-Lease agreement of February 22 [23], 1942.80 In that agreement, we covenanted with the British Government to defer ultimate lend-lease settlement “until the extent of defense aid is known and until the progress of events makes clearer the final terms and conditions and benefits which will be in the mutual interests of the United States and Great Britain, and will promote the establishment and maintenance of world peace”. This policy has received the strong approval of the only Committees of Congress which have considered the matter. The extent to which cash payments may figure in the ultimate resolution of the lend-lease accounts is by no means clear. Until further instructions are received, I should regard the Master Agreements, and particularly Article VII thereof, as the basic statement of our policy on the subject. I find the proposal that the British repay us for the plants in question inconsistent with the intent of the Agreements.

Finally, it is my view that under the President’s recent memorandum on the relationship between lend-lease policy and British dollar balances, we are to take up specific lend-lease transactions regarded as doubtful on their merits, and without special reference to the British financial position. Yet I understand that the chief justification for the present proposal is that the British can afford it. In view of all the circumstances, I do not think that fact is sufficient basis for a request on our part that the British return to us as reverse lend-lease the sums we have paid them under completed contracts for the purchase of munitions factories. The usual situations calling for reverse lend-lease financing, as stated in the Reciprocal Aid Agreement of September 3, 1942,81 are those requiring payments in pounds, not in dollars. It was decided that we should acquire the factories in question primarily because it was regarded as preferable, in the light of our military policy, for our Government to own such facilities. Most of the factories have been purchased. An exception was made for the factories not yet purchased, as to which we are requesting reverse [Page 42] lend-lease. The reasons which govern the exception do not seem to me to apply in the case of factories already purchased.

I am sure that further discussion of the facts between members of your staff and officers of this Department will clear up what seems to me to be a regrettable misunderstanding.82

Sincerely yours,

Cordell Hull
  1. Preliminary Agreement between the United States and the United Kingdom regarding principles applying to mutual aid in the prosecution of the war against aggression, signed at Washington, February 23, 1942; for text, see Department of State Executive Agreement Series No. 241 or 56 Stat. (pt. 2) 1433. For correspondence on negotiation of the Agreement, see Foreign Relations, 1942, vol. i, pp. 525 ff.
  2. Agreement with the United Kingdom regarding principles applying to the provision of aid to the armed forces of the United States; for text, see Department of State Executive Agreement Series No. 270 or 56 Stat. (pt. 2) 1605.
  3. Further discussions on this subject resulted in the War Department’s agreeing to a British request not to pursue the question of transfer of the munitions factories at this time. This decision was communicated to the Secretary of State in a letter of February 23, 1944, from Under Secretary of War Robert P. Patterson. (841.24/2200)