840.50 Recovery/7–147
Memorandum of Conversation, by the First Secretary of Embassy in the United Kingdom (Peterson)
Recapitulation of Main Points of Discussions of Under Secretary Clayton and Ambassador Douglas With British Officials Regarding the Dollar Problem
This meeting, under the chairmanship of Sir Edward Bridges,1 was held at 4:00 o’clock June 24 in the Treasury Chambers. There were present Sir John Henry Wood and James Helmore of the Board of Trade; Sir Percivale Liesching, Ministry of Food; Sir Edmund Hall-Patch, Foreign Office; A.T.K. Grant and R.W.B. Clarke of the Treasury; and a representative of the Ministry of Fuel and Power. Mr. Peterson and Mr. Gunter attended from the Embassy.
Sir Edward Bridges opened the discussion seeking elucidation of Mr. Clayton’s plans for short-term assistance to Europe. Mr. Clayton contemplated the essential components of assistance as food, fuel and fiber but said that the present rate of Europe’s imports, some $3 billion annually, could not continue but must be reduced by rehabilitation and enlarged production.
Mr. Clayton said the long-term assistance in reconstruction and development should be via the International Bank. He felt that the Bank’s view of Europe and its repayment prospects depended on an attack on the immediate problem of food, fuel and fiber. He felt that it was up to Europe to agree on a program and he hoped this would contemplate minimum and decreasing calls on the U.S.
Sir Edward Bridges summarized these points as an inventory of Europe’s needs and a cooperative agreement in Europe regarding economic rehabilitation. He understood that the U.S. plan would require commitments on rehabilitation and asked questions regarding the speed of the program and the number of nations which would be involved. Mr. Clayton reiterated the program could not be piecemeal—no dabs of assistance here and there.
Sir John Henry Wood discussed various aspects of European trade, particularly as it related to the U.K. From what he understood about the nature of the possible short time assistance to Europe by the U.S. he was doubtful as to the advantage which would accrue to the U.K., particularly if no special consideration was given the U.K. position and if the plan involved submerging British national interests. In particular, he was worried about pooling of [Page 275] European resources. He thought that if the plan put dollars into Europe this would automatically ease the U.K. position to some extent, but that the relief would not be of sufficient magnitude. The pooling of assistance would reduce the U.K. position to that of the “lowest” in Europe. If this was the case, in view of Britain’s relative advance in production as compared to the rest of Europe, he thought the U.K. might be better outside of the plan since the British position could be maintained by bilateral deals.
Sir Percivale Liesching visualized the U.K. as a partner with the U.S. in world recovery and said the U.K. was examining the Marshall Plan to consider how far it would help the British position. He saw the plan as a partial solution.
Mr. Clayton indicated that he failed to understand the British argument that they would not benefit in the plan for Europe. In particular, he felt that U.K. would not gain from a restrictionist policy.
In answer to Sir Edward Bridges’ question on timing Mr. Clayton said it would be impossible for the present Congress to consider assistance to Europe and as yet there was only talk of another session.
Mr. Helmore attempted to explain how some people in the British Government felt that the U.K. would be better off to follow at this time a policy based on bilateral trade deals. This discussion was rapid and not lucid to Peterson but seemed based on the thought that, given the relatively strong U.K. economic position as compared with Europe other than Belgium, the U.K. was in strong position to bargain and deal bilaterally with suppliers and thus induce a change in terms of trade in favor of Britain. Sir Edmund Hall-Patch felt that the Marshall Plan does not meet U.K. needs because Britain’s lack of dollars made it impotent to act as a partner in the plan.
Mr. Clayton attempted to explain in more detail how he is visualized that short term assistance would be provided. In particular, he stated that he was not thinking in terms of limiting supplies that could be purchased in the U.S. For example, the plan might include purchases of food stuffs for the U.K. from Canada and Latin America.2 The British representative indicated that they had not been clear on this point and that obviously if the plan took this form the British dollar position would be considerably relieved.
There was a flavor of critical examination of the Marshall idea in the comments of the British officials and at one stage Mr. Douglas pointed out to Sir Edward Bridges that we had been seeking the facts of the British financial position for three months, “but only last Friday were we able to get the figures”. Sir Edward agreed and regretted [Page 276] the delay, but said there was a most complex web of transactions to be analyzed in getting the present estimates and the Treasury had been loaded with work.
The discussion included brief resume of coal production, efficiency at the coal face, absenteeism and stock position. Stocks are expected to reach nine million tons by October 1. Sir John Henry Wood was optimistic regarding the coal and steel position. There was also a discussion of U.K. food imports totalling $1,600,000,000, of which approximately $220 million came from the U.S.; $270 from Canada; $190 from Argentina; $200 from Australia and New Zealand and perhaps $250 from the Colonial Areas. Mr. Gunter and Treasury officials analyzed the British financial tables and it was agreed that Mr. Gunter’s method of analysis showing part of British difficulties as attributable to decreased sterling balances could be defended.
At the conclusion of the meeting Mr. Douglas referred to the need for budgetary rationalization among countries of Europe and thought the Marshall Plan would involve commitments regarding fiscal affairs. In the absence of commitments further assistance to European economy would be fruitless since the whole scheme would be undermined by inflationary pressures which would break through the existing mechanisms of control.