The Ambassador in the United Kingdom (Douglas) to the Secretary of State
Dear Mr. Secretary: We have now received from the British Treasury two additional tables primarily concerned with estimating the future British international financial position, to which I referred in my letter of June 25.1 The contents of these tables are summarized in cable No. 3499 of June 26, and copies are attached.2
These tables are preliminary, as were the tables which I sent you the other day. One of the tables presents estimates of the British balance of payments and the dollar drain over the coming year, while the other table gives certain relevant statistics concerning the volume and distribution of U.K. trade. It is important to note with regard to the estimates that they are probably cast in a pessimistic light, and the table presenting the estimates should be read with this reservation in mind.
The tables do, however, indicate quite clearly the very significant point that the British economy is greatly dependent on the recovery of the rest of the world. The British have always experienced a deficit in their balance of payments with the Western Hemisphere which they have traditionally covered by achieving a surplus in their transactions with the Eastern Hemisphere. The failure of the Eastern Hemisphere to recover as had been hoped has resulted in a situation in which the British payments deficit with the Western Hemisphere has been intensified and in which the British have been unable to earn sufficient foreign exchange in their trade with the Eastern Hemisphere to meet this deficit. The economic recovery of the Eastern Hemisphere would enable the British to reduce their dependence on the Western Hemisphere [Page 32] and to earn foreign exchange from the Eastern Hemisphere with which to settle their debts with the Western Hemisphere.
In the light of this basic dependence of the United Kingdom on trade with the Eastern Hemisphere, I believe that we can count on British leadership in an overall approach to solving Europe’s economic problems.