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

611.4131/11–2445

Minutes of a Special Meeting of the United States-United Kingdom Combined Top Committee²²

[Washington,] November 24, 1945—10:30 a.m.

Present:	U.S. Representatives	U.K. Representatives
	Secretary Vinson	Lord Keynes
	Mr. W. Clayton	Sir Henry Self
	Mr. T. McCabe	Mr. F.E. Harmer
	Dr. Harry White	Mr. F. G. Lee
	Mr. E. G. Collado	Mr. R. B. Stevens
	Mr. W. Friedman
	H. Havlik
	Mr. W. R. Lester
	Mr. J. Pehle
	Mr. Frank Coe
	Mr. R. Brenner

1. General.

The meeting had before them statements prepared on the U.S. side headed “Lend-Lease and Surplus Property” and “Claims and Counter Claims”, which are attached to these Minutes as Annex “A” and Annex “B” respectively.²³

Mr. Clayton said that a good deal of work had been put in at the operating level on both sides on calculations relating to the various ingredients of the Lend-Lease settlement. He thought that the time had now come to consider an over-all figure in the light of the calculations that had been made. For this purpose the two documents (Annex “A” and “B”) had been prepared on the U.S. side. Referring to the Lend-Lease settlement document (Annex “A”), Mr. Clayton drew a general distinction between two groups of items cited as Schedule A and Schedule B.²⁴ He stated that it was the view of the U.S. that it would be necessary for the U.K. to settle for Schedule A either in cash or under 3C credit. The U.S. was willing to include in Schedule A, Item 4 (“Net claims accepted”) representing a balance of $53.44 million due to the United Kingdom. It would also be necessary for the settlement relating to U.S. surplus property in the U.K. to be dealt with on the same terms as Schedule A, namely, on a cash or 3C credit basis, since these were the terms on which U.S. surplus property was being offered to other countries and it would be difficult to offer any other terms to the United Kingdom. Mr. Clayton stated that with respect to the items listed in Schedule B, the U.S. was willing to settle on the basis of the same credit terms which would apply to the financial credit under discussion by the Combined U.S.–U.K. Finance Committee.

Mr. Clayton went on to say that the lowest amount which would be acceptable to the United States for the complete settlement with respect to Lend-Lease and surplus property as representing the net balance due to the United States by the United Kingdom was $750 million. Of this sum, $150 million had been taken as representing the net balance of the Schedule A items including the settlement for U.S. surpluses in the U.K. He added that any figure agreed upon at the present meeting would have to be cleared with the Top Committee on the U.S. side, and that the present figure was conditional upon a satisfactory conclusion of the overall economic discussions.

Lord Keynes said that while there was substantial agreement on the U.K. side with many of the figures in the U.S. statement, there still remained a number of important points on which agreement had not been reached, such as the adjustments requested on the Civilian Inventory, the method of settlement for the Military Inventory, the figure for the U.S. surplus property in the United Kingdom and certain outstanding claims. Mr. Clayton stated that the $750 million was a lump sum and that an examination item by item would add up to a considerably higher figure.

2. Schedule A: Cash Settlement.

With regard to Schedule A, Lord Keynes observed that the cut-off date for services and reverse lend-lease raw materials had been taken as December 31, 1945 whereas the U.K. side had been working on the assumption that the cut-off date for services would be February 28,. 1946. Mr. Lee said that if the earlier date were chosen the figure in respect of the value of services formerly given on reciprocal aid would be somewhat lower. Mr. Collado said that, if practicable, the U.S. side would prefer to make November 30 the cut-off date for lend-lease shipping services since to continue beyond that date would merely tend to exhaust the supply of lend-lease appropriation funds. The U.K. side saw no objection to this proposal on financial grounds.

It was agreed that, subject to the possible exception with respect to shipping mentioned by Mr. Collado, the general cut-off date would be December 31, 1945.

The Meeting recognized that adjustments might be necessary in certain items in Schedule A, but these could be made later in the light of detailed bookkeeping. For purposes of the settlement, Mr. Clayton suggested that the present figure of $118 million should be taken as the amount due by the United Kingdom with respect to the items listed in Schedule A and that after the actual accountings on each, of the items, except that of claims, had been completed, any necessary adjustment in the net amount due could be effected.

Lord Keynes agreed that this would be an appropriate procedure and stated that the sums listed in Schedule A appeared to be approximately correct. He enquired how the U.S. Administration would want the settlement effected if it were to be for cash. He assumed that it would be in order for part of the proceeds of the loan to be utilized for this purpose.

Mr. Clayton said that there would be no objection to this course.

3. U.S. Surpluses in U.K.

Lord Keynes pointed out that if a settlement for U.S. surpluses in the United Kingdom were to be dealt with in the same manner as the items in Schedule A it would be necessary to arrive at a precise figure for the surplus settlement. Mr. Clayton said that the figure which he had quoted of $150 million would result in a nominal figure of $32 million for U.S. surpluses in the U.K. In the U.S. view, this was considerably less than the value of these surpluses, but for the sake of a quick over-all settlement the Administration would, he believed, be prepared to agree to a round figure of $150 million as representing the balance due on all the items for which payment in cash was required.

The U.K. representatives said that on the basis of the advice they had received from London they could not possibly offer more than about $5–$10 million for U.S. surpluses in the United Kingdom. Sir Henry Self recalled that these surpluses had been examined by U.S. Departments; that in many cases they duplicated U.K. surpluses which were already a drug on the market; that U.S. surpluses had been combed over a number of times by the U.S. military authorities and those items which had any real value been removed; that the remainder were for the most part non commercial in type and that their value even as scrap was at best doubtful. The U.K. Government had virtually no use whatever for these surpluses and any sum paid for them would be for the purpose of relieving the U.S. Government of an embarrassment rather than on account of anything which could be realized from their resale. In these circumstances it would be impossible to justify to Parliament the purchase of these surpluses for a sum of the dimensions suggested by Mr. Clayton.

Secretary Vinson said that in the U.S. view the figure at which these surpluses was being offered was exceedingly low and was contingent upon U.K. agreement on an over-all figure. If the U.K. were not prepared to agree to the over-all figure of $750 million including the surpluses, he could only suggest that the U.S. proposal of $750 be withdrawn and that the meeting should go through the table item by item and work out on a more detailed basis what the net balance due to the United States ought to be. There were a number of items such as military food which might well be charged for at full value if dealt with individually, and it would be found that the net balance due on such a basis would be considerably in excess of $750 million. A settlement for U.S. surpluses in the U.K. at $5 million such as Lord Keynes had suggested would be totally inacceptable in the United States, which, in such circumstance, would rather remove them from the U.K.

Mr. McCabe said that he could understand that the value of the surpluses to the United Kingdom might be considerably less than the sum which could be obtained for them elsewhere. He believed that these surpluses were of considerable scrap value to the United States. The United Kingdom might not be the best market for the sale of scrap. Included in the U.S. list were some items such as Jeeps which might be disposed of more advantageously in third markets. He asked whether the U.K. imported scrap, and Sir Henry Self stated that some scrap was imported in normal times. He added that previously Sir Henry Self had mentioned a figure of $10 million, as compared with the $5 [million] now offered by the U.K. Sir Henry Self indicated that the $5 million was based on a valuation of surplus apart from lend-lease settlement considerations, of which he was well aware.

Mr. McCabe stated he had understood at a meeting which he had attended in London in August that the United Kingdom Government wished to arrange an over-all deal for the purchase of these surpluses, but if this were not the case he thought that the position ought to be reconsidered with a view to the U.S. taking over those items which would be useful for its own scrap stockpiling programme or for sale to third countries.

Mr. Harmer said that at the meeting in London to which Mr. McCabe referred the United Kingdom representatives had indicated that they would like to be provided with details of U.S. surpluses in the U.K. so that they could see whether an acceptable offer could be made. The main purpose of this suggestion, however, had been to avoid the political friction which might arise if the United States were debarred from disposing of their own surpluses in the United Kingdom and compelled to take them away.

Lord Keynes said that he thought Mr. McCabe’s remarks on this problem were very helpful. If the United Kingdom offer created embarrassment he would much prefer to see the question handled in the way which Mr. McCabe suggested. The value of these surpluses to the United Kingdom was, according to the information he had received, insignificant, e.g., they included very little if any heavy scrap; consisting mostly of alloy and light scrap in which the United Kingdom was not interested.

Mr. Lee enquired whether it would not be possible to arrive at a lend-lease settlement without taking account of the U.S. surplus problem. The two were not really related and it now seemed that it might be difficult to reach agreement on U.S. surpluses until further studies had been made to determine what part of the surpluses the U.K. might wish to purchase and what part the U.S. might wish to remove.

Mr. Clayton said that he would prefer to deal with the lend-lease and surplus problem as a whole. Once the process of excluding difficult items from the settlement began it was impossible to say where it might end. He thought that both sides were anxious that the settlement when reached should be final and comprehensive.

Secretary Vinson said that if surpluses were to be left out of the settlement and the complete settlement broken into separate pieces, he would be strongly inclined to add a substantial sum for military food and other civilian type items in the military inventory.

Mr. McCabe referred to the substantial benefits to the U.K. which flowed from the willingness of the U.S. Military to hold off from the general recapture of items in the Military Inventory in consideration of the over-all terms of lend-lease settlements and the satisfactory conclusion of the other U.S.–U.K. economic negotiations. The exercise of a general right of recapture could only be a source of embarrassment to the United Kingdom. He considered, however, that unless an over-all settlement were reached it would be difficult for the U.S. side to take a liberal position as regards recapture.

Mr. Harmer suggested that if the settlement for U.S. surpluses could be included in Schedule B, namely, that part of the arrangement for which no detailed accounting was required, it would be easier to present on both sides of the Atlantic.

Lord Keynes stated that before considering the surplus question further he would like to look at the rest of the U.S. statement with a view to discussing certain items still in dispute.

[Here follows paragraph 4: dealing with discussion of a claim advanced by the United Kingdom regarding aircraft purchased in the United States for dollars by the United Kingdom and subsequently turned over to the United States at the latter Government’s request after Pearl Harbor.²⁵]

5. General.

Lord Keynes said that he entirely appreciated the difficulties of the position as Secretary Vinson had described them. At the same time, he had to emphasize that an arrangement which involved the payment of $750 million for the winding up of lend-lease also created a grave problem for the U.K. Government and he believed that if a settlement of this kind were laid before Parliament, it would provoke even more vigorous reactions than those in Congress of which Secretary Vinson had spoken. If it were possible to agree on a global figure of $500 million for the lend-lease settlement, he believed that this would be acceptable to public opinion in the U.K.

Secretary Vinson said that the figure of $750 million already represented a substantial concession on the part of the U.S. He thought that the figure might well be considerably higher.

It was agreed that it would not be possible to make any further progress in discussing the foregoing matters at the present meeting, and they were accordingly held over for later consideration.²⁶

[Here follows paragraph 6 which briefly summarizes discussion concerning various points raised in U.S. paper Annex A, not printed.²⁷]

22. These are agreed combined minutes.
23. Neither printed.
24. Schedules A and B concerned pipeline and inventory materials, respectively.
25. For the ultimate disposition of this claim, see Agreement II, paragraph 3, of the Mutual Aid Settlement between the United States and the United Kingdom, March 27, 1946; Department of State, Treaties and Other International Acts Series No. 1509, p. 14.

26. At the 11th meeting of the United States Financial Committee, held on November 28, 1945, it was agreed that a sum of $650 million for the lend-lease and surplus property settlement would be acceptable to the United States and that this figure would be considered separate from the amount of the credit (611.4131/5–146, Folder 2). For proposal of this sum to the British, see p. 187.

    For an analysis of the lend-lease and surplus property settlement sum of $650 million, see Additional Report of the Special Committee Investigating the National Defense Program, Senate Document, 79th Cong., 2nd sess., Report No. 110, pt. 5, pp. 23–33, 87–91.

27. No agreement was reached on these points at this meeting.