841.51/2–1747: Circular Instruction
The Secretary of State to Consular Officers in British Colonial Dependencies
The Secretary of State refers to the Anglo-American Financial Agreement of December 6, 1945, and invites attention to the bearing of this Agreement on the import and exchange control policies of the British colonial dependencies.
The Agreement as such obligates only the signatories thereto, namely the United States and the United Kingdom. However, a supplementary note from the British Government, a copy of which is enclosed,1 made most of the British colonial dependencies subject to the provisions of Sections 8 and 9 of the Agreement. The British Government undertook to enforce the principles of these sections in those colonial dependencies in which it has the required authority through normal legislative or administrative channels to do so. In the case of the more [Page 5] autonomous dependencies, it undertook to use every endeavor to persuade the local authorities to comply with the principles in question.
Section 8 of the Financial Agreement provides that after July 15, 1946 the United Kingdom “will not apply exchange controls in such a manner as to restrict … payments or transfers in respect of …2 current transactions” with the United States. It also provides (with certain exceptions) that after July 15, 1947 the United Kingdom will not impose any restrictions on payments or transfers for current transactions with any country.
Section 9 provides that, beginning January 1, 1947, any quantitative import restrictions imposed or maintained by either country will not discriminate against imports from the other country in respect of any product. This section specifies three types of exceptions to the general rule of non-discriminatory quantitative import restrictions.
Clause (a) permits discrimination where necessary in order to use up inconvertible currencies accumulated up to December 31, 1946. By “inconvertible currencies” in this context is meant currencies which are not readily convertible into dollars or other “hard” currencies. It should be noted that, so far as the colonial dependencies are concerned, this clause is not regarded as permitting discrimination in favor of the United Kingdom. However, if a colonial dependency were to be in possession of French francs or Polish zloty, for example, and could not use up such currencies otherwise, it would be permitted to discriminate in favor of France or Poland under this clause.
Clause (b) of Section 9 permits discrimination where necessary to assist countries “whose economy has been disrupted by war.” The Department, however, invites particular attention to the restrictive phraseology of this clause. Discrimination is allowed only when there is “special necessity” for the type of assistance mentioned. Moreover, the discriminatory measures should be circumscribed and should not involve “a substantial departure from the general rule of non-discrimination.” Thus while a colonial dependency might have the privilege of imposing on some product a quota which would discriminate in favor of, say, Holland or Belgium, it should not use this clause as a means of substantially avoiding its obligation under Section 9 to give the United States most-favored-nation treatment with respect to quantitative import controls. In other words, clause (b) should be given a strict and narrow construction.
Clause (c) of Section 9 refers to the “scarce currency” provisions of the Monetary Fund Agreement. This clause merely permits colonial dependencies to impose discriminatory quantitative restrictions which would have equivalent effect to any exchange restrictions which they [Page 6] would be authorized to impose on some currency declared to be scarce under Article VII of the Fund Agreement.
The officer in charge is requested to keep the Department informed regarding developments in local import and exchange controls with particular reference to their conformity with Sections 8 and 9 of the Anglo-American Financial Agreement. He is authorized to discuss with the local authorities any case involving an apparent departure from the provisions of these sections; and is requested to report such discussions in full to the Department, which will issue further instructions when warranted.
A list of the British colonial dependencies is attached hereto.3 It is to be noted that the present instruction does not apply to any territory not named on this list.