Foreign Relations of the United States, 1947, The British Commonwealth; Europe, Volume III

841.51/8–747: Circular Instruction

The Secretary of State to Certain Diplomatic and Consular Officers ¹

secret

Washington, August 7, 1947.

The Secretary of State refers to that portion dealing with Section 9 in a circular instruction dated February 17, 1947 sent to certain American Consular Officers under the title “Relation of Sections 8 and 9 of Anglo-American Financial Agreement to British Colonial Dependencies.”

For the information of the Officers in Charge, a copy of each of the following documents is attached:

1) Memorandum handed to Assistant Secretary of State for Economic Affairs by Sir John Magowan of the British Embassy, Washington, on April 28, 1947.²

2) Proposed directive to be sent to British dependencies by the British Colonial Office.²

3) Statement read by the Secretary of State at his press conference on July 23, 1947.³

4) Aide-Mémoire sent to Sir John Magowan of the British Embassy, Washington, by Assistant Secretary of State for Economic Affairs on July 24, 1947.

The Officers in Charge will note that the Government of the United Kingdom proposes to implement Section 9 of the Financial Agreement in those colonial dependencies in which it has the authority to do so. However, as will be noted from the proposed British directive, the dependencies in question as well as Burma and Southern Rhodesia which share with the United Kingdom a common membership and quota in the International Monetary Fund would be free mutually to discriminate in favor of one another in the administration of their quantitative import restrictions.

The National Advisory Council on International Monetary and Financial Problems carefully considered this proposal of a variation from nondiscrimination. The Council decided that the proposal was not inconsistent with the Financial Agreement.

In considering this question, the Council gave considerable weight to the fact that the original Proposals for Expansion of World Trade and Employment⁵ and the Financial Agreement were negotiated at the same time and as parts of the same series of negotiations. The text of the Financial Agreement and of a Joint Statement on Commercial Policy by the United States and the United Kingdom, announcing agreement in principle of the two countries on the Proposals, was issued by this Government in a single document in December 1945.⁶ Section C(5) of the Proposals states that Members (of the proposed International Trade Organization) should not be prohibited from applying quantitative restrictions in a manner designed to maintain the par value of the currencies of the territories having a common quota in the Monetary Fund. A similar provision was included in the proposed Charter for an International Trade Organization published by the United States in September 1946,⁷ and in the London and New York redrafts of the proposed Charter. It is also included in the Draft General Agreement on Tariffs and Trade which it is proposed to conclude at the meeting now in progress at Geneva⁸ with the object of bringing into force certain parts of the Charter prior to the time it will be possible for the entire Charter to be approved and implemented. Moreover it was the understanding of the American negotiators at the time of negotiation of Section 9 that if balance-of-payments requirements made it necessary the United Kingdom and those dependencies sharing with it a common quota and membership in the International Monetary Fund could discriminate in favor of imports from one another. The current balance-of-payments position of the United Kingdom and the fact that unrestricted colonial expenditures would be a serious drain on the dollar availabilities of the United Kingdom appear to make the common quota exception fully applicable at the present time.

It will be noted that in its Aide-Mémoire to the British Embassy of July 24, 1947 the Department has proposed discussions at the technical level with respect to the form of quantitative import controls to be adopted in the dependencies. The Officers in Chargé will be informed of further developments.

In view of recent constitutional changes in Burma and the omission of Burma from the list of colonial dependencies in the Halifax letter,⁹ the Department is studying the question whether common quota discrimination applies to Burma.

1. Sent to 36 posts, primarily consular offices in British colonial dependencies.
2. Not printed, but see footnote 2, p. 34.
2. Not printed, but see footnote 2, p. 34.
3. Printed in Department of State Bulletin, August 3, 1947, pp. 228–229.
5. Department of State publication 2411.
6. Department of State publication 2439, Commercial Policy Series 80.
7. For documentation regarding this subject, see the index entry in Foreign Relations, 1946, volume i .
8. For documentation on the negotiations at Geneva, see volume i .
9. See footnotes 1 and 3, p. 34.