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

800.515/12–345: Telegram

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

Washington, December 3, 1945—6 p.m.

10476. For Hawkins³⁵ from Collado. Vinson, White, Coe,³⁶ Acheson, Clayton, and I met all day Sunday³⁷ with full British finance groups including Bridges³⁸ and Grant. They said London wished to present Bretton Woods to Parliament on December 12 and 13 together with documents on commercial policy, finance including credit, and lend-lease and surplus settlement. All of these would have to be published Tuesday or Wednesday of this week in order that members would have an opportunity to study them. [It was later agreed that a Thursday morning (December 6) was the earliest we could shoot for.]³⁹

We presented our November 30 draft on finance—which you have, and they presented a new draft.⁴⁰ We insisted on our draft with following modifications:

1. Page 1–no change

2. Page 2–In sentence re $175 million,⁴¹ British wish to include balances accumulated to cut-off date—not merely date of signing this agreement.

3. Section 5(iii) first sentence—Except balances of Colonial Dependencies.

4. Section 6–Re date change to one year from effective date unless in exceptional cases a later date is mutually agreed after consultation.⁴²

5. Section 7 (i)–After effective date

6. Section 7 (ii)–Re date add in exceptional cases as in Section 6. [Note: this is interpreted to mean by individual countries.]⁴³ Also replace “with the approval” in subparagraph (b) by “in conformity with the provisions of.”

7. Section 7 (iii)–Omit—but minutes will show and British will write letter stating they will do this to extent they have legal and actual control along lines of your suggested wording.

8. Section 8–Last paragraph [sentence?]–British offered and we accepted the old language—“as soon as practicable and in any case not later than December 31, 1946.”⁴⁴

9. Section 9 (i)–slight rewording⁴⁵

10. Section 9 (ii)–Completely reworded but substance unchanged—or if anything strengthened.⁴⁶

11. Add a section on coming into force of agreement—related to Congressional action.

12. Add a section at British suggestion reviving old section “The Government of U.K. may accelerate repayment of the line of credit.”

The change in Section 7 (ii) reflects Article Eleven (2) of Bretton Woods⁴⁷ and would make it possible for U.K. to impose restrictions against Argentina or other nonmembers (say in case they blocked U.K. pesos) unless such restrictions in opinion of IMF were prejudicial to interests of Fund or other members. We felt our previous formulation went further in tying our own hands on this than we wanted to.

We turned down British requests as follows:

1. To defer principal.

2. To base waiver on 1–year rather than 5–year average.

3. To replace all of Section 5 by simple “with due regard to the principle of equitable treatment as between all their external creditors.”

4. Removal of effective dates from Sections 6, 7 (ii), and 9 (ii).

5. Removal of date from inconvertible currency exception in sub-point (a) in Section 8.

The British, who had again asked for $4.5 billion including lend-lease, appeared very pleased with $3,750 million plus $650 million lend-lease.⁴⁸ They stated that Sections 7 (ii) and 9 (ii) would cause “difficulty” in London especially on short time schedule available for consideration. They stated everything—including lend-lease—would have to be referred to London for approval. We are quite confident, however, that they will accept everything except possibly part of Section 9 (i). We feel Bridges had a lot of authority. It appeared that Bridges may have been sent because of dissatisfaction re Halifax, Keynes, et al or London feeling that the latter were not adequately informing London. This feeling I am certain was fully cleared up in Bridges’ mind and Secretary Vinson went out of his way to build up actions of and effective negotiations by the older group.

On lend-lease we made the offer with which you are familiar—$650 million all on same terms as credit consisting of about $532 million fixed for Schedule B and surplus and $118 million for Schedule A subject to exact accounting.⁴⁹ It already appears that this item will rise to $140 million (total to $672 million) as reverse lend-lease deliveries of rubber, etc., will not reach figures we previously used.⁵⁰ The British were delighted and stated they would recommend acceptance by London.

We are meeting Monday [Tuesday?]⁵¹ morning re documents and timetable. Documents will probably be a joint communiqué, the commercial policy understanding, the finance memo as now drafted, and a short document on lend-lease and surplus including the letter on Article VII—air, shipping, telecommunications, etc.⁵² A more detailed lend-lease paper would follow.

It has been agreed to have joint release of these documents simultaneously in London and Washington. The Monday evening Senatoral dinner is on. There will be some sort of meeting with House leaders Tuesday. The release on ITO will have to be simultaneous with the rest. We are now discussing shooting for Thursday publication with Tuesday afternoon press conferences if possible. This implies fast drafting of final documents and fast London clearance.

We will post you further. [Collado.]

Byrnes

35. Harry C. Hawkins had recently returned to London after having been in Washington since September, participating in the economic negotiations.
36. Frank Coe, Director, Division of Monetary Research, Department of the Treasury.
37. December 2. The sixth and seventh meetings of the U.S.-U.K. Combined Finance Committee were held on this date at 10:30 a.m. and 3:30 p.m., respectively.
38. Sir Edward Bridges, Permanent Secretary of the British Treasury.
39. Brackets appear in the original.
40. Dated December 1, 1945; not printed.
41. Section 4 b. Also in connection with waiver of interest payments, the British proposed at the sixth meeting that principal, as well as interest payments, be deferred in any year when the basic conditions were met. At the afternoon session, the Americans rejected this plan (611.4131/5–146, Folder 5).

42. Concerning sterling convertibility, the United Kingdom delegation had stated, in a draft document entitled “Sterling Area Arrangements,” November 7, that: “The Government of the U.K. would be prepared on the basis of aid on a scale appropriate to the size of the problem, to proceed not later than the end of 1946 to make arrangements under which the current earnings of all sterling area countries would be freely available to make purchases in any currency area without discrimination, apart from any receipts arising out of military expenditure by the U.K. which it may be agreed to treat on the same basis as the balances accumulated during the war. …” (611.4131/5–146, Folder 2, U. S. Fin. Document 6)

    The United States Financial Committee discussed this proposal at its fifth meeting on November 8 and decided: (a) that convertibility of sterling holdings of all countries should be insisted on; (b) that the date fixed for beginning of convertibility should be June 30, 1946 instead of December 31, 1946; and (c) that only sterling acquired during the next 3 years through military expenditure should not be convertible (ibid., fifth meeting).

    At its sixth meeting, November 13, the Americans agreed to accept British arguments that the beginning date should be set at the end of 1946 (ibid., sixth meeting). When, at the sixth meeting of the U.S.-U.K. Combined Finance Committee, the U.K. subsequently proposed that no fixed date be set, the U.S. offered an agreeable compromise that the date be designated as one year after the coming into effect of the agreement (ibid., seventh meeting).

    The British accepted point (c), but objected to making convertible sterling earned by non-sterling area countries which could, in contrast, block their currencies earned by exports from the United Kingdom. This was at the fourth meeting of the U.S.–U.K. Combined Finance Committee, November 19 (ibid., Folder 5). The Americans, however, rejected these arguments; see p. 190 and paragraph 7 of the Financial Agreement; text cited, p. 194.

43. Brackets appear in the original.
44. This “old language” had appeared in the U.S. draft of November 18, not printed (611.4131/5–146, Folder 5, fourth meeting, Annex). The alteration in the effective date for section 8 was agreed to by the British in return for U.S. acceptance of the change in date in section 6 (ibid., seventh meeting). At the fifth meeting of the Combined U.S.–U.K. Finance Committee, November 26, the British had urged strongly that no specific date be set for the lifting of Anglo-American bilateral quantitative import restrictions (ibid., fifth meeting).
45. This section was based substantially upon a formula proposed by the British in their document “Sterling Area Arrangements”, November 7, p. 4 (611.4131/5–146, Folder 2, U.S. Fin. Document 6).
46. The basis for this section on convertibility of released sterling balances, not present in any previous U.S. drafts, was apparently introduced by the State Department at the eleventh meeting of the U.S. Financial Committee, November 28 (611.4131/5–146, Folder 2). No copy of the State Department draft has been found in Department files. At this eleventh meeting, it was decided to refer the draft paragraph to the Technical Committee for changes of wording. The concept was agreed to by the British, subject to change as indicated, at the seventh meeting of the U.S.-U.K. Combined Finance Committee (611.4131/5–146, Folder 5).
47. See Proceedings and Documents of the United Nations Monetary and Financial Conference, p. 959.

48. As indicated by the minutes of the meeting of the U.S. Top Committee, November 7, p. 157, there was disagreement among the American delegates on the amount of the credit to be extended to the United Kingdom. At the eleventh meeting of the U.S. Financial Committee on November 28, following inconclusive discussion as to whether $3½ or 4 billion should be extended, Assistant Secretary of State Acheson suggested that the matter be referred to the President for settlement (611.4131/5–146, Folder 2). President Truman indicated that he decided upon the final figure: $3,750 million; see Memoirs by Harry S. Truman, vol. i, Year of Decisions (Garden City, Doubleday and Company, Inc., 1955), p. 479.

    Regarding the lend-lease figure, see footnote 26, p. 173.

49. Schedule A comprised pipeline material and Schedule B inventory goods.
50. On the contrary, by subsequent agreement the sum due the United States was reduced as a result of further supplements and modifications. See the agreement signed between the two governments on July 12, 1948, Department of State Treaties and Other International Acts Series No. 1770, or 62 Stat. (pt. 2), 2034.
51. No record of a meeting held on Monday, December 3, has been found; presumably the results of such a meeting would have been included in this telegram, since it was not sent until 6 p.m.
52. Drafts of this letter were being worked on at this time, but the letter was not published at the conclusion of the negotiations.