611.4131/5–146
Minutes of a Meeting of the United States-United Kingdom Combined Finance Committee53
Present: Secretary Vinson (In the Chair)
| U.S. Representatives | U.K. Representatives | ||||
| Mr. Clayton | Lord Halifax (part time) | ||||
| Mr. Acheson | Lord Keynes | ||||
| Mr. Wallace | Mr. Brand | ||||
| Mr. Eccles | Prof. Robbins | ||||
| Mr. McCabe | Mr. Hall-Patch | ||||
| Dr. White | Mr. Harmer | ||||
| Mr. Collado | Sir Edward Bridges | ||||
| Also Present | Also Present | ||||
| Mr. Brenner | Mr. Grant | ||||
| Mr. Friedman | |||||
| Mr. Glasser | |||||
| Mr. Gardner | |||||
| Mr. Knapp | |||||
| Mr. Waring | |||||
|
1. Lord Halifax said that after the prolonged discussions which had taken place on the 2nd December the U.K. representatives had referred to London the text of the draft agreement in the form which the U.S. representatives were prepared to accept.54 He was happy to say that the authorities in London had now authorised the U.K. representatives to accept the draft in its entirety, subject to one very important reservation. That reservation related to the provisions in the draft which would, in effect, involve the withdrawal from the U.K. of the safeguards specifically provided in the I.M.F. agreement. The most essential of these safeguards was contained in Article XIV Section 2 of the I.M.F. agreement, governing the transitional period: under paragraph 7(ii) (b) of the draft agreement the U.K. would be required to give up all its rights under that Section at the end of one year from the effective date of the agreement—i.e. in perhaps fifteen months time. Ministers would in any event face a difficult task in persuading Parliament to accept the I.M.F. agreement: if they had [Page 191] to say that the particular safeguard which the supporters of the I.M.F. agreement had always emphasised in discussions would disappear in fifteen months time, the chances of their obtaining Parliamentary approval for the I.M.F. agreement would be gravely jeopardized. The protection given by these rights was indeed one to which all parties in the U.K. attached importance in the difficult period which lay ahead. In the circumstances, the Prime Minister had expressed the earnest hope that the U.S. representatives would be able to agree to the deletion of the particular words in paragraph 7(ii) (b) of the draft loan agreement which would deprive the U.K. of that protection.
Ministers were also concerned at the fact that the draft loan agreement would apparently involve the disappearance of any safeguards on which the U.K. could rely in the event of a scarcity of dollars. Further, as at present drafted, the agreement appeared to deprive the U.K. of the right, by resigning its membership of the I.M.F., to regain its freedom of action in matters regulated by the I.M.F. agreement. Indeed it would be deprived of the right for the whole fifty-year period of the loan agreement.
Lord Halifax trusted that it would be possible for the U.S. group to agree to appropriate amendments of the draft loan agreement to meet the U.K. position on all the foregoing points.
2. Secretary Vinson and Mr. Clayton said that they thought that on the last two points mentioned by Lord Halifax an amendment of the draft would be possible in order to safeguard the U.K. position. But they feared that on the first question—that of the transitional period safeguards—no compromise was possible. It had always been fundamental to U.S. thinking on the proposed credit that one of its main objects—and certainly one of its main attractions in American eyes—would be that it would enable the U.K. to dispense with the transitional period safeguards after a shorter period than that envisaged in the Bretton Woods Agreement. That Agreement, of course, did not take into account the provision of a substantial credit by the U.S. Government, to one of the member powers: if such a credit were granted it was only logical to suppose that the recipient country would thereby be able to do without safeguards which otherwise would be essential. It was quite clear from soundings which the Administration had made that if the U.S. representatives were to make a concession on this point, the support for the credit of powerful political and commercial organisations would be lost, since this provision was to them a cardinal point in its favour. Much as the U.S. representatives would regret a breakdown in negotiations which had come so near a successful conclusion, that must be the outcome if the U.K. felt unable to accept the substance of this particular provision.
[Page 192]Sir Edward Bridges and Prof. Bobbins urged that in other provisions of the agreement the U.K. would be specifically committed to forego the safeguards in question vis-à-vis both the U.S.A. and the sterling area countries. There was no suggestion of any retreat from those commitments. But in the difficult and uncertain political circumstances which were likely to obtain over parts of the world in the next few years it was surely not unreasonable to ask that, outside the wide area represented by the U.S.A. and the sterling area countries, the U.K. should be free from specific commitments abrogating the protection given by the I.M.F. agreement. It would of course be the intention of the U.K. Government to move as rapidly as possible along the road to full convertibility, and the provision of the credit would enable them to quicken their pace. But to be required to enter into specific commitments would involve very serious political difficulties. Mr. Eccles said that one of the strongest arguments for the credit was that it would make the I.M.F. really effective at an early date. He did not see how any compromise was possible.
In summing up the discussion, Mr. Clayton said that the U.S. representatives would be prepared to insert words in paragraph 7(ii) (b) of the draft agreement providing that in exceptional cases the U.S. and U.K. Governments could agree after consultation, that the provisions of Article XIV Section 2 of the I.M.F. could still be invoked. But further than that they were definitely unable to go.
The U.K. representatives said that they must report the position reached on this point to the U.K. Government.
3. After further discussion it was agreed that the draft agreement should be amended in the following respects in order to meet the other points emphasised by the U.K. representatives:-
- (a)
- A new subparagraph should be added at the end of paragraph 7 to indicate that that paragraph and paragraph 8 were in anticipation of more comprehensive arrangements by multilateral agreement and would operate until the end of 1951. This would safeguard the right of the U.K. to recover its freedom of action by the course of resigning from membership of the I.M.F.
- (b)
- A new subsection (c) should be
added to paragraph 8 in the following terms:–
“or (c) either Government imposes quantitative restrictions having equivalent effect to any exchange restrictions which that Government is authorised to impose in conformity with Article VII of the Articles of Agreement of the I.M.F.”. This would safeguard the exceptional provision for the use of discriminatory quantitative restriction in the event of a declaration of a condition of scarcity of any particular currency.
4. Lord Keynes said that he wished to raise one further point. It would be recalled that the U.K. representatives had always made it [Page 193] plain that they interpreted the undertakings in paragraph 5 of the draft agreement (or, indeed, any other undertakings elsewhere in the agreement) as in no way precluding or restricting the freedom of the U.K. to make overseas loans of any character. He thought that this was fully accepted by the U.S. representatives, but in order that there should be no possible misunderstanding he would be grateful if a passage could be inserted in the minutes in the following terms:-
“It has been understood in these discussions that there is nothing in this agreement which restricts the future freedom of the U.K. to make overseas loans of any character.”
Mr. Clayton said that the U.S. representatives were in full accord with the summary of the position as given by Lord Keynes and readily agreed that the passage which he had quoted should be incorporated in the minutes.