841.51/10–1047
Memorandum by the Deputy Director of the Office of International Trade Policy (Nitze)1 to the Under Secretary of State (Lovett)
Subject: Treasury Department proposal with respect to the release of the remaining $400 million of British credit and institution of negotiations for modification of loan agreement
Discussion
The Treasury Department has proposed that the Chancellor of the Exchequer advise Secretary Snyder that, since the number of countries with which it has been impossible for the United Kingdom to complete satisfactory arrangements consistent with the terms of the Anglo-American Financial Agreement is too large to consider as exception cases under a reasonable interpretation of Section 8(ii) (b), consultations between the two governments should be held under Section 12 for modification of Sections 7 and 8. The Chancellor’s communication would also advise that while Section 9 (trade discrimination section) has not heretofore constituted a hindrance to the British import program, it is foreseen that discriminations will arise in a small area, and the British would therefore also propose a modification of this Section under Section 12. The British would also re-state their adherence to the general principles of the loan agreement, and would propose a resumption of drawing of the $400 million remaining under the line of credit. The United States reply would accept the proposal for discussions for modification of the Agreement under Section 12 and acquiesce in the British request for resumption of withdrawals.
As a matter of law, the Executive of the Government can adopt the policy of full compliance by the United States with its obligations under the Agreement, even though the British do not comply. However, it is clear that such a course of conduct by the Executive would raise serious problems with respect to its relationship to the Congress which may prejudice Congressional action on (a) the eventual modification of the British agreement and (b) the Marshall Plan. Congress may take the position that it was its intention that continued withdrawals after British failure to comply completely with the agreement should be subject to prior Congressional approval of the modifications. It is, however, most urgent from an economic and political point of [Page 82] view that the British be in a position to know that they can definitely count on the $400 million during the coming months. In the event that the British cannot definitely rely upon the availability of the $400 million, they may have to institute controls which would not only retard their recovery program, but which would probably lead them into larger violations of the loan agreement and may force them into complete bilateralism.
Recommendations
It is recommended that the State Department member of the NAC propose to the NAC that Secretary Snyder immediately approach the available Congressional leaders along the following lines:
- 1.
- A presentation of the serious situation in which Britain now stands and the undesirable effects which would result were the $400 million credit not to be made available without delay.
- 2.
- To the extent that the British are permitted to withdraw the $400 million credit now and their situation is correspondingly ameliorated, the necessity on the part of the British to resort to restrictive trade practices will be less urgent than otherwise. Conversely, failure to authorize withdrawals may prejudice continued British adherence to basic principles of the agreement.
- 3.
- In the event that the Congressional leaders personally approve the release of the remainder of the credit, and state that they will support before Congress an executive decision to release the $400 million, but also advise that they cannot commit the Committees or the Congress as a whole, it is recommended that withdrawals be permitted.
- 4.
- In the event that the Congressional leaders advise that they oppose withdrawals from the credit prior to consideration by Congress of the proposed modifications, it is recommended that no withdrawals will be permitted prior to Congressional action.
- 5.
- In the event that the Congressional leaders state that they are not in a position either to approve or disapprove current withdrawals during the period of the modification negotiations, it is recommended that the matter be brought back to the NAC in order to determine whether there is anything in the attitude of the Congressional leaders which would permit the Executive on its own responsibility to authorize withdrawals.2
Concurrences
This memorandum was concurred in by OFD, ITP, and Ambassador Douglas.
- This memorandum was also prepared by Walter S. Surrey, Deputy Assistant Legal Adviser for Economic Affairs.↩
- At the seventy-first meeting of the National Advisory Council on October 13, the following action was taken: “The National Advisory Council is of the opinion that the Chairman of the Council should discuss with appropriate Congressional leaders the question of whether the United Kingdom shall be permitted to draw the $400 million balance remaining to its credit under the terms of the Anglo-American Financial Agreement. If Congressional approval is obtained the Council agrees that the Chairman should proceed with the program of reopening drawings under this credit. If Congressional reaction is unfavorable the Council requests that the matter be referred to it for reconsideration.” (60 D 137 Box 1)↩