840.50/1–845: Telegram

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

261. Hawkins, Steere and Penrose had another conversation today with Liesching, Eady, Robbins and Shackle.

1. The tentative position of the UK officials on preferences may now be summed up as follows. They are willing to agree in accordance with the method first proposed by the Canadians to what they call “closing margins” of preference in connection with a substantial tariff cut. They think that this would leave a greatly reduced residue of preferences which would not have serious diversionary influences on trade and would at the same time meet their domestic political pressures based on sentiment rather than economics. They continue to [Page 8] adhere to the position stated in section 4 of Embassy’s 159, January 5 that they would not be willing to accept any cut in the preferential margins that would remain and they will hold out for a 5% floor.

You will doubtless want to make a detailed examination of the effects of these proposals.

We understand privately that UK Ministerial opinions on the subject are still not crystallized and that some ministers feel that they cannot make up their minds until they have more data before them. They are not likely to base their ultimate decisions wholly on economic grounds.

We expressed serious concern regarding the ideas of the UK officials on the extension of the principle of preferences to state trading and quotas (paragraph 2 of section 4 of Embassy’s 159, January 5) and asked them how they proposed to apply the principle. The only concrete idea as to methods came from Bobbins who suggested that in state trading the price to preferential sources of imports should not differ by a percentage greater than that of the preferential margin.

2. UK officials expressed concern about the idea of sanctioning import restrictions in conjunction with government sponsored measures to restrict similar domestic products. They think that this would leave too wide an opening and would allow restrictions concerned not only with primary products but also with semi-manufactured and manufactured products. They themselves think that their separate agricultural proposals would cover all legitimate needs and that it would be dangerous to extend permission to impose such restrictions beyond agricultural products. Eady and Robbins referred to the possibility that a government-sponsored rationalization or a cartel arrangement operating under government sanction might open the door to extensive restrictions of imports of manufactured products.

The conversations will be continued on Thursday.22

  1. January 11.