Lot 65A987, Box 99

Minutes of a Meeting of the United States Delegation, Geneva, Switzerland, May 6, 1947


[Here follows a discussion of other subjects.]

3. Preferences. Mr. Wilcox referred to the studies prepared by the UN, Southern Dominions and Canada negotiating teams outlining the impact on the US request lists of a failure to get substantial action on Commonwealth preferential contracts. It was noted that the canned fruit and dried fruit industries would be seriously affected; in other words, one agricultural group would have to pay the price of protecting [Page 926] another agricultural group—wool. Mr. Hawkins observed that the fruit industries are rapidly expanding.

Mr. Clayton said that he could not see why our deadlock with the Southern Dominions on wool should prevent us from holding the UK to the obligations they undertook in connection with the British loan. Mr. Wilcox referred to the “mutually advantageous” qualification existing in the loan agreement. Mr. Clayton emphasized the basic bilateral nature of the financial agreement, while Mr. Wilcox and Mr. Hawkins attempted to show that the negotiators had accepted at the time the loan was discussed the necessity of achieving a multilateral and mutually satisfactory agreement. Mr. Clayton said that if he had interpreted the commercial policy commitment of the British as did Mr. Wilcox and Mr. Hawkins, he would never have accepted the agreement; that he had never understood the agreement to mean anything more than what it said, namely, that the British agreed to negotiate in good faith a reduction of tariffs and an elimination of preferences in return for adequate concessions on our part. He stated again that he could not see why we had to conclude successful agreement with the Australians before we could hold the British to their obligation implied in the financial agreement. Mr. Hawkins pointed out that if Mr. Clayton’s analysis was right, it would mean that the UK would be bargaining away Australian preferences in the UK market, at no loss to the UK, for a reduction in US duties. He said that this just was not equitable. Mr. Clayton repeated that he could not see this or that in any event it did not convince him.

Mr. Clayton went on to say that if this interpretation was correct the US had only a paper agreement and asked how, on this basis, would it be possible to bring pressure to bear on the British so that they, in turn, would force the Dominions to give the necessary waiver of preference contracts. Mr. Hawkins said that on the contrary the financial agreement means a great deal to us. For the first time in a generation the British have indicated their willingness to negotiate on preferences. This they had never agreed to before. Mr. Evans said that in addition we can now force the British to give waivers of their preference rights to other countries, for instance Canada, so that these countries can negotiate a reduction of preferential margins in their discussions with us.

Mr. Brown referred to the fact that the British have agreed to bargain, and are in fact doing so, for the reduction of duties on an extremely large number of items and have actually refused to negotiate due to existing preferential contracts on only 35 items. He admitted that a number of these 35 items were of critical importance to us. To all this Mr. Clayton replied that he did not see how we had gotten anything out of the British loan as far as commitments were concerned to negotiate preferences, if this was a correct interpretation [Page 927] of the agreement. Mr. Hawkins and Mr. Wilcox emphasized that the British Government has absolutely no support at home for taking action to eliminate preferences. They reminded him that it was the preference question which almost broke up the British loan discussions. Mr. Hawkins went on to say that if the British government should act to abrogate preference contracts, or to bargain unilaterally preferences enjoyed by the Commonwealth in the UK market, it would be suicidal for them at home and would certainly alienate completely members of the Commonwealth.

Mr. Wilcox asked what would happen if we were in a position to carry out the line of argument suggested by Mr. Clayton, specifically, that we should force the British to negotiate on preferences in the face of their failure to obtain the necessary waivers from the Commonwealth. He thought that Australia would either withdraw from the conference or in any event would refuse to go along with the Charter. He reminded the Delegation of Australia’s key position on the Charter negotiations. Mr. Evans supported this conclusion and observed that a deflection [defection?] of the Southern Dominions would be disasterous not only to the Charter, but also to the tariff negotiations. It was Mr. Schwenger’s opinion that should the US bow to the Australians and offer a wool duty reduction, he had no confidence that we would not run into another commodity problem and another reason for procrastinating immediately thereafter. Mr. Schwenger said that he agreed with Mr. Ryder’s statement that there were reasonable doubts about getting the Australians to go along even if a cut in the wool duty should be offered.

4. Future Course of Action. Mr. Wilcox suggested that perhaps the most effective way of attacking the problem would be to call Heads of the Commonwealth Delegations in … He said Mr. Clayton could mention the fact that the Commonwealth countries had come to Geneva with the conviction the US would cut the wool duty. But in the face of this expectation where were the reasonable offers we had a right to receive in the light of such a concession? It was Mr. Schwenger’s opinion, however, that we had not yet put enough pressure to bear on the Commonwealth based on our good offers. Mr. Schwenger then referred to Mr. Wilcox’s draft cable to Washington, and stated that in his opinion Mr. Wilcox overemphasized the solidarity of the Commonwealth and also put the original Australian offers in too good a light.

Mr. Clayton suggested that the cable be redrafted for further consideration. He asked that Mr. Wilcox call in the Heads of the Negotiating Teams and get a factual picture. Mr. Clayton also suggested that a question be added inquiring about the current status of the wool bill.

[Page 928]

Referring to Mr. Nitze’s inquiry, Mr. Clayton said that he could either return to Washington in the near future and join in the fight for satisfactory wool legislation and then return to Geneva later, or he could stay here and attempt to work out a compromise. He asked for the judgment of the Delegation on which would be the best course of action.

It was agreed that Mr. Clayton would call in the Heads of the Commonwealth Delegations individually, following up on the letters sent out transmitting Mr. Ballif’s chart-analysis of our overall offers. These interviews would begin with Helmore, then Wilgress, then Coombs, Holloway and Nash. It was agreed that the Heads of the respective negotiating teams would brief Mr. Clayton with memoranda summarizing the important elements of our offers and what we find most unsatisfactory about the offers given us. No indication would be given of any action the US might take on wool. However, it was agreed that Mr. Clayton should refer to the Commonwealth’s expectation that the US was going to offer a 50% cut in the wool duty and that even on the basis of this expectation their offers were totally unsatisfactory.