840.50/1–545: Telegram

The Ambassador in the United Kingdom (Winant) to the Secretary of State

159. Hawkins, Steere13 and Penrose had another conversation today with Liesching, Eady, Robbins, Fergusson and Shackle. The [Page 4] main points put forward by the United Kingdom officials are as follows:

1. In a discussion of the difficulties of preventing discrimination in state trading, Liesching and Eady took a somewhat more hopeful view than Robbins and Fergusson of the possibility that the concept of commercial considerations could gradually, by a sort of case law procedure, be given an objective content.

2. United Kingdom officials are apprehensive of the effect of an escape clause relating to emergency situations, along the lines of article XVII of our tentative draft. They think this is a crucial question and discussed it at length. One of the major attractions to them of a multilateral convention is that United States would give a lead in the reduction of tariffs and that what was done by one country would be done by all. In view of the creditor position and general economic importance of United States they feared that such an escape clause would create the impression that the United States could nullify or throw out of gear the whole tariff reduction on the plea of emergency situations. Officials are concerned about the reactions of some of their more skeptical ministers and of United Kingdom manufacturers. They would particularly fear the application of such a provision to textiles.

Hawkins pointed to the temporary nature of such restrictions and outlined the history of such escape clauses in our trade agreements and showed how rarely they had been invoked in practice. United Kingdom officials were impressed by the record and asked for as detailed data as possible. They are anxious to have such data, apparently for use in talking with ministers. We referred also to the scarce currencies clause in the monetary agreement.14 United Kingdom officials are impressed by the usefulness of this clause to check abuses of an emergency escape clause. Robbins referred to opposition to this clause by Williams15 and others in United States and added, “people here will watch with breathless interest what happens to the scarce currencies clause in Congress”. United Kingdom officials added that even though they might rely on us not to use an emergency escape clause unduly, there was no assurance that such a clause would not be abused by other countries. They hope by separate agricultural proposals (see Embassy’s 11114 December 1516) to avoid the general use of quotas.

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3. United Kingdom officials question the desirability of complete prohibition of export duties and suggest parallel treatment of export and import duties. They think the infant industry argument is also applicable to export taxes in relation to processing industries. They appear to have in mind some of their crown colonies and while they admit the force of the argument against export duties based on freedom of access to raw materials, they feel that in some cases this argument might be offset by the principle of colonial trusteeship.

4. As regards existing preferences United Kingdom officials say they will have to insist on a minimum floor of 5% ad valorem. They consider that having preferential margins plus such a minimum floor would be an adequate counterpart to a reduction of tariffs by 50%. However, when questioned, they admit that the technique suggested by us for reducing preferential margins by horizontal reductions in most favored nation rates would not be unacceptable provided their suggested floor was agreed to. They are not willing to accept any formula that would result in a reduction of residual preferences.

Their second point on preferences is that the principles to be applied to preferential import duties should be applied also to state trading and to quotas. They are vague as to the method by which this could be given quantitative application and do not appear to have got much beyond enunciation of the principle.

The discussion of preferences was left incomplete and will be resumed on Monday.17

  1. Lovd V. Steere. Agricultural Attaché at the Embassy in London.
  2. Reference is to article VII of the Articles of Agreement of the International Monetary Fund resulting from the Bretton Woods Conference; for text, see Department of State, Proceedings and Documents of the United Nations Monetary and Financial Conference, Bretton Woods, New Hampshire, July 1–22, 1944 (Washington, Government Printing Office, 1948) vol. i, pp. 952–954. For documentation relating to the Conference, see Foreign Relations, 1944, vol. ii, pp. 106 ff.
  3. John H. Williams, Dean of the Graduate School of Public Administration, Harvard University, and Vice President of the Federal Reserve Bank of New York.
  4. Foreign Relations, 1944, vol. ii, p. 102.
  5. January 8.