Foreign Relations of the United States, Diplomatic Papers, 1945, The British Commonwealth, The Far East, Volume VI

611.4131/5–146

Minutes of a Meeting of the United States Top Committee⁶⁸

[Washington,] October 6, 1945—11 a.m.

Present:	Mr. W. L. Clayton, Chairman
	Secretary Vinson	Mr. Harry White
	Mr. Amos Taylor	Mr. Howard
	Mr. McCabe	Mr. Hannaford
	Mr. Eccles	Mr. Angell
	Mr. Paul	Mr. Gardner
		Mr. Orchard
	Mr. Collado } Gen. Secy. Mr. Luthringer	Mr. Szymczak
		Mr. Raynor

1. Mr. Clayton reported that Secretary Vinson and he had had three talks with Lord Halifax and Lord Keynes in which they had gone over informally the whole question of a credit to Britain—amounts, terms, interest, maturities.⁶⁹ The British had strongly urged that there be no interest. No conclusions had been reached and no commitments made.

2. Mr. Clayton referred to the Executive Order providing for the transfer of Lend-Lease and Foreign Surplus Disposal functions to the Department of State,⁷⁰ and reported that the function of lend-lease settlement had already been transferred as of October 4. The remaining functions would be transferred within a few days. State would organize these functions into one operating organization with Mr. McCabe in charge. It was therefore recommended and approved that the Lend-Lease and the Surplus Disposal Committees be merged into one under the chairmanship of Mr. Clayton with Mr. McCabe acting as his Deputy.

3. Mr. White⁷¹ reported that the Finance working group was preparing a written report on the British balance of payments deficit and the blocked sterling accounts. He presented an oral interim report as follows:

With respect to the balance of payments the British had estimated a net deficit of $5–6 billion in three years. Incomplete data indicate that these figures are too pessimistic. The British now state the deficit may total $5.3 billion. The working group estimates that, exclusive of lend-lease cleanup and surplus disposal and about $1 billion of additional accumulation in 1946 of sterling balances, the deficit will amount to $3.3 billion, although these figures might be out to the extent of $1 billion either way. Of the total $1.5 billion represents a deficit in dollar payments. If no financial aid to Britain were forthcoming from the United States this deficit might be met by $500 million reduction in dollar balances, $500 million in South African gold, and $500 million reduction in imports.

With respect to the sterling balances the British had stated they were $13 billion on V–J and would reach $15–15.5 billion by December 31, 1946. $2 billion could be handled by miscellaneous arrangements (South America, Australia, Greece, Norway, etc.) and an additional $2 billion might be agreed as ordinary working balances, leaving a V–J remainder of $9 billion. The British had suggested that a reduction in principal of $4 billion be made, leaving $5 billion. By the end of 1946 this would have increased to $7–7.5 billion at the most.

Mr. White indicated that probably $1 billion could be obtained by the British, $600 million by a Canadian credit, and $400 million by South African gold operations.

He pointed out that the 10 percent of liquid funds to be offered in the sterling accounts settlement could be used only for current transactions, and that the British felt that it would take the sterling area three or four years to use up this amount.

After some discussion of individual items in the above estimates, Mr. White concluded that it would take $4 billion to clean up the British balance of payments deficit and sterling accounts “nicely” (some members of the working group believe it would require $5 billion); that with $2 billion a less adequate job could be done; while with less than $2 billion no very useful results could be achieved.

There followed a lengthy discussion of these figures and conclusions, and of methods of meeting the British financial needs including the possibility of making dollar credits available directly to members of the sterling area which in turn would make sterling credits available to Britain. Mr. White suggested that sterling balances accumulated before V–J be treated in one way, while post-V–J sterling accumulations and new dollar credits should be treated pari passu. This led to a discussion of the moral arguments for scaling down the sterling indebtedness and the comparability of such indebtedness with lend-lease. Mr. Angell⁷² urged the adoption of a principle regarding scaling down of such indebtedness based on its originating from transactions which were similar to lend-lease and furnished by the U.S.

Mr. McCabe pointed out that most of these arguments had a defensive character and that it was essential to take the offensive in presentation and explain the future benefits to the United States of the broad program we were proposing with the British. It was generally agreed that the United States interest should be stressed in public presentation. It was also agreed that it was essential that the financial and commercial policy understandings be accompanied by an overall settlement of lend-lease, surplus disposal, and related claims and benefits.

68. This was the first meeting of this committee.
69. No record of these talks has been found in Department files.
70. Executive Order 9630, September 27, 1945, 10 Federal Register 12245; reprinted in Department of State Bulletin, September 30, 1945, pp. 491–492.
71. Harry Dexter White, Assistant Secretary of the Treasury.
72. James W. Angell was an Assistant Administrator in the Foreign Economic Administration until its dissolution. Later in October he was appointed U.S. representative, Allied Commission on Reparations, Germany.