The Ambassador in the United Kingdom ( Winant ) to the Secretary of State
[Received February 8—5:25 p.m.]
1376.1. Keynes41 in a personal conversation with Hawkins and Penrose said that much mutual toleration will have to be exercised on international economic matters in the transition period. For that reason, he added, it is all the more important that long term commercial policies should be worked out and agreed as soon as possible. This will keep expedients that may have to be resorted to in the transition period in their proper perspective and offset the danger that such temporary devices may harden into permanent practices.
2. Britain, said Keynes, is a traditionally free trade country and has a fundamental and inescapable interest in the multilateral organization [Page 20] of world trade. The circumstances of the great depression and the world war have drawn the United Kingdom into practices which were unavoidable in the special circumstances of the times but would be disastrous to Britain’s interest if adopted here and elsewhere as permanent policies. Much nonsense has been written and said in favor of bilateral bargaining and restriction by a vocal minority in Britain who have had a somewhat open field because of the absorption of economists and administrators in government.
Keynes added that he and others will shortly organize a counter offensive to offset the effects of this restrictionist propaganda and to demonstrate to the public the necessity of multilateral economic relations to serve the interest of Britain.
3. Keynes said that the United Kingdom position on commercial policy will be a very moderate one. The amount of protection involved in the United Kingdom agricultural proposals (i.e. the values to be given to the symbols X and Y as defined in Embassy’s 725 January 20, section 2 and 1260 February 5) will not be high. This is in accord with previous views expressed to United States by Liesching, Eady and Robbins.
4. It is important, however, Keynes added, to recognize that greater difficulties will arise when we enter into discussions with highly protectionist countries which are in an early stage of industrial development but are determined to industrialize. Keynes dwelt at some length on these difficulties, but in a very tentative manner, as if he were thinking aloud rather than expressing a clearly worked our [out] position. It may not be practicable, he said, to get some of these countries, particularly India, to enter into a convention that will go as far as United States and United Kingdom will be prepared to go. In such cases he is himself somewhat heretical with regard to the most favored nation principle, but the Board of Trade is firmly wedded to it. Therefore he thought it might not be practicable to bring every country into the convention at first. Too sharp a discrimination against nonmembers might cause political difficulties. Possibly the countries in an early stage of industrialization might be given some period to adjust before fully embracing the convention. The trouble is that though they use the infant industry argument they do not want to drop protection later.
5. Keynes thinks that there will be no difficulty in getting the world bank approved in Parliament. As regards the Monetary Fund it may be best to wait for it to pass through Congress first. He emphasized once more the vital importance to British attitudes on economic reconstruction of the prospects of the maintenance of a high level of employment in the United States and added that the opposition to the [Page 21] nomination of Wallace42 is widely interpreted here as indicative of American unreadiness to accept the implications of a full employment policy.