611.4131/10–3145: Telegram
The Secretary of State to the Ambassador in the United Kingdom (Winant)
9593. U.S.–U.K. main committee on commercial policy has not met since meeting reported in Deptel 9039 of October 11. Work at technical subcommittee level has been proceeding, however, and we are reasonably certain of agreement on exchange control, preferences and cartels.
On exchange control it has been agreed in subcommittee that the trade proposals should include a provision requiring the Fund and the Trade Organization to have a common membership and should incorporate by reference the exchange principles of the Fund.
The draft on preferences, which has been agreed upon in subcommittee, and which we understand the British are now clearing with the Cabinet, provides: a) that definite arrangements should be made for the substantial reduction of tariffs and for the elimination of tariff preferences, b) that as an initial step in the process of eliminating preferences it should be agreed that reductions in most-favored-nation rates of duty will operate automatically to reduce or eliminate margins of preferences, that existing international arrangements will not be permitted to stand in the way of action agreed upon with respect to preferences, and that no new preferences will be introduced, and c) that action for elimination of preferences will be taken in conjunction with adequate measures for the substantial reduction of barriers to world trade on a broad scale. It will be observed from the foregoing that the draft on preferences makes it clear that we are not asking the British to give us a unilateral commitment on preferences in consideration for financial aid and apart from what may be done on tariffs and trade barriers generally.
With regard to cartels, the draft agreed upon in subcommittee largely reflects the original U.K. proposal for a case-by-case approach to the problem of restrictive business practices.89 We understand that this draft has now been approved by the British Cabinet.
There remains for consideration the question of quotas used for balance-of-payments purposes during the postwar transitional period. The British have thus far insisted on the inclusion of a provision granting freedom to discriminate during this period. Such a provision is necessary, they say, because a) British opinion would react unfavorably toward anything more hampering of U.K. freedom than the Monetary Fund Agreement, which permits exchange discriminations during the transitional period, b) the pound is likely to remain [Page 153] inconvertible for at least a short period (perhaps a year) after the projected loan goes through, and so long as this is the case discrimination by the U.K. cannot be avoided, and c) the loan arrangements as they now stand do not appear liberal enough to warrant any hard-and-fast commitment by the U.K. that it will not discriminate during the transitional period.
In an effort to meet some of the British preoccupations we have made tentative counterproposals on quotas which would permit discrimination when necessary to the utilization of inconvertible currencies for needed imports. The British have taken the position, however, that this is not enough.90 A further meeting on the subject with Liesching and Lee (Treasury) will be held today.91
- See telegram 8934, October 9, 6 p.m., to London, p. 144.↩
- As a result of these British objections, the original American proposal was altered before agreement was reached. Chapter III, section c, 2, of “Proposals for Expansion of World Trade and Employment”, concerning restrictions to safeguard the balance of payments, should be compared with paragraph 9 of the Anglo-American Financial Agreement; for citations to texts, see bracketed note, p. 194.↩
- No record of this meeting has been found in Department files.↩