Lot 60 D 137, Box 1

Minutes of the Sixtieth Meeting of the National Advisory Council on International Monetary and Financial Problems, Washington, D.C., April 17, 1947

top secret

[Here follows a list of the 25 persons present, and a discussion of other subjects.]

4. Settlement of Sterling Balances. Mr. Schmidt1 recalled that it had been reported to the Council several meetings earlier that the Staff Committee had set up a working group to follow the implementation of the U.S–U.K. Financial Agreement in view of the fact that the Secretary of the Treasury in consultation with the Council was responsible for the implementation of the Agreement. The Staff Committee had considered the following three aspects of the Agreement:

The requirement that as of July 15, 1947 newly acquired sterling and sterling released from accumulated balances be made generally convertible.
While there had been an informal suggestion that the United States might have to consider the possibility of postponing the convertibility requirement, the Staff Committee did not feel there was indication at present that such postponement would be requested.
The possibility that accumulated balances will not be funded by the British Government.
At the time of the negotiation of the Anglo-American Agreement it was expected by the United States that the sterling held by third countries would fall into three categories and that balances in the first two would be free, while balances in the third category (sterling accumulated in the past and not yet available for current expenditure, [Page 7] in the U.K. or elsewhere) would either be deposited in a separate, fully blocked account, or funded. It appears that it is the present intention of the British Government not to set up separate accounts for sterling not available for current expenditure, but rather to work out with each creditor country the over-all rate of use of the global balance held by such country. If the balances are not funded or segregated it will be of great importance that this Government be regularly informed as to the rate and manner of release.
The possibility that temporary rather than permanent settlements will be reached.
Section 10 (i) obligates the United Kingdom to “make every endeavor to secure the early completion” of settlements of the sterling balances. Section 10(ii) obligates the British Government in effect to grant full convertibility to all sums made available for current transactions out of the accumulated balances. It has been learned that British officials are considering 4 or 5-year settlements with the understanding that the agreements will be renegotiated at the end of that period. While the plan for temporary settlements raises the question as to whether the United Kingdom has carried out its obligations, it would seem that we could not object if we are assured the British have made every endeavor to secure complete settlements and were unable to do so. This Government, however, would be concerned that the temporary settlements do not result in the use of sterling in a discriminatory manner. In any event the British are required by the Agreement to make every endeavor to secure the early completion of final settlements.

The recommendations of the Staff Committee with respect to these several points were contained in NAC Document No. 399.2

Mr. Acheson3 stated that he agreed with the recommendations. Mr. Eccles4 also agreed but commented upon the impressions he had gained during the course of the negotiations. The United States had expected so far as possible that the British would obtain permanent settlements and that temporary settlements would be a very secondary choice. We could not obligate the British to make permanent settlements but it was the impression that they intended to try to do so. There would be great advantage to the British if they could make permanent settlements and in turn there would be an advantage to us so far as the British loan was concerned. In view of their present straitened circumstances, the British as a great debtor nation are in a position to dictate terms. Within five years the British could be expected to be in a stronger financial position and hence less likely to obtain favorable terms. The United States would be very desirous of having settlements favorable to the British because many of the obligations were created on the basis of inflated prices and in a sense the obligations were comparable to those under lend-lease. However, [Page 8] the further the war recedes into the background the less likelihood there is that these obligations will be related to the sacrifices the British made during the war. There will be more of a feeling that these are obligations that should be paid. The experience of the United States after the first World War could be cited as a parallel. Mr. Eccles felt strongly that everything possible should be done to get permanent settlements, including every encouragement this country could give.

The Chairman5 agreed that this was a sound argument but pointed out that some countries were taking an adamant position. Mr. Blaisdell6 commented upon the political difficulties that stood in the way of permanent settlements with certain areas at this time but suggested that it might be desirable to brief the new Ambassador to India on this matter.

Action. The following action was taken:

The Secretary of the Treasury should at the earliest possible date explore fully with the appropriate officials of the British Government the nature and progress of British plans for implementation of Sections 8 and 10 of the Financial Agreement. In particular, he should:

express his appreciation of the efforts on the part of the British negotiators to keep this Government informed of the sterling settlement negotiations;
obtain additional detailed information as to the nature and progress of the negotiations, and plans for further negotiations;
inform the British of the importance to the United States of being regularly informed as to the rate and manner of releases from accumulated sterling balances after July 15; especially in the event the British propose not to segregate sterling which is not available for current expenditure;
in the event the British propose to make temporary settlements of the sterling balances
express, if it appears appropriate, his confidence that the decision to reach temporary settlements will be made only after every possible effort has been exerted to reach satisfactory permanent settlements;
express his confidence that, should temporary settlements prove necessary, the U.K. will at the earliest favorable opportunity endeavor to obtain the completion of final settlements consistent with the principle of non-discriminatory use of accumulated sterling balances.

[Here follows discussion of other subjects.]

  1. Orvis A. Schmidt, Acting Secretary to the National Advisory Council.
  2. Not printed.
  3. Under Secretary of State Dean G. Acheson.
  4. Marriner S. Eccles, Board of Governors, Federal Reserve System.
  5. Secretary of the Treasury John W. Snyder.
  6. Thomas C. Blaisdell, Jr., Department of Commerce.