611.4531/7–1845
The Commissioner in India (Merrell) to the Secretary of State
[Received July 26.]
Sir: I have the honor to refer to the Department’s confidential instruction No. 325 of July 2, 1945,70 inviting comments by the Mission on points raised during a conversation on June 20, 1945, between Sir Ardeshir Dalai and Sir Girja Bajpai, on the one hand, and officers of the Department on the other.
[Here follows discussion of particular points.]
No doubt Sir Ardeshir is sincere in stating that the present Government of India does not contemplate any change in its tariff policy. Whether that will be true a year from now is questionable. The Wavell Plan to reorganize the Executive Council has failed, but another attempt may be made. If and when Congress Party nationalists are given an important and perhaps dominant voice in determining policy it is not unlikely that the party’s long time demand for a high protective tariff may be heeded. It must not be forgotten that attempts to conclude a lend lease agreement with India71 failed because of the unwillingness of the Government of India to commit itself to a policy of eliminating trade barriers.
Assistant Secretary of State Clayton is reported to have told Sir Ardeshir that there should be no difficulty in obtaining reasonable credits in the United States once the Congress increases the lending power of the Export-Import Bank. It is suggested that prior to granting any substantial credit to the Government of India, the Export-Import Bank should obtain assurances with respect to:
- 1)
- The operation of import licensing in India in a non discriminatory manner and its liquidation as soon as practicable. This may involve the withdrawal of India from the Sterling dollar pool unless some agreement can be reached with the British on the operations of the pool during the transition period during which it may be permitted to continue.
- 2)
- A guarantee against discriminatory legislation which would affect the investments of Americans in India. This would mean that the Government of India would refrain from enacting legislation that would require all new enterprises to be controlled by Indians. It should be left to the individual entrepreneurs to decide whether or not they will demand majority ownership in new companies undertaken jointly with Americans. If Indians can obtain the financial assistance they need for the purchase of capital goods from the Export-Import Bank they will be reluctant to come to terms with private American investors. The Export-Import Bank, on the other [Page 277] hand, probably can not make available “know-how” with its credits. In many lines it is in the interests of a balanced economic development in India that the policy of excluding foreigners from the control of Indian enterprises should be relaxed. If this is not done, and American credits are available for the purchase of capital goods, considerable waste is apt to occur from misdirected efforts on the part of Indian enterprisers. In complicated lines of manufacture, it is unlikely that Indians can hire first class technical advice without a willingness to share and in some cases to give others the control. Control is more important than ownership.
As previously reported, the major obstacle in the way of negotiation of a commercial treaty between India and the United States is believed to be the existence of the so-called “commercial safeguards” enjoyed by Britain. If these could be superseded by an Anglo-Indian commercial treaty, freely negotiated, it is believed that reluctance on the part of India to negotiate a treaty with the United States would diminish.
Respectfully yours,
- Not printed.↩
- See Foreign Relations, 1943, vol. iv, pp. 246 ff.↩