Foreign Relations of the United States, 1948, Western Europe, Volume III

840.50 Recovery/6–2648

Memorandum by the Secretary of State to President Truman ¹

Washington, June 26, 1948.

Under the Economic Cooperation Act of 1948, the responsibility for negotiating bilateral agreements with the participating countries rests upon the Secretary of State in consultation with the Administrator. At the present time the negotiation of the agreements has been virtually completed except for a deadlock with the U.K. concerning the establishment of most-favored-nation treatment for Japan in a note which would accompany the bilateral agreement.

The Department of the Army has consistently stressed the importance of obtaining most-favored-nation treatment for the occupied areas for many months. The Department of State endeavored to obtain its inclusion in the General Agreement on Tariffs and Trade negotiated at Geneva but was unsuccessful. It has stood firmly for such provision in the present negotiation. All countries have agreed to the extension of most-favored-nation treatment to Germany, but the British, supported chiefly by the French and Chinese, have been adamant concerning Japan. They base their case primarily upon a firm Commonwealth commitment, stating that their steps towards Western Union require them to be particularly careful of their commitments to the Dominions.

Ambassador Douglas, after a prolonged conference with Bevin and Cripps, has advised strongly that the point should not be pressed further by the United States.²

There is nothing in the record concerning the ECA before Congress regarding this matter. However, Secretary Royall feels he has a commitment to certain committees of Congress arising from testimony concerning occupied areas.

Mr. Hoffman feels strongly that the economic recovery program should not be jeopardized by insistence in connection with a Far Eastern problem.

It is recommended that the State Department in its negotiations on the bilaterals should: (1) include provisions for most-favored-nation treatment for Germany; (2) include, with as many countries as will do so, provisions for most-favored-nation treatment for Japan; and (3) with respect to the United Kingdom, obtain their agreement to negotiate promptly apart from the bilateral on this matter.³

1. The source text bears the notation: “This was taken by Mr. Thorp personally to the White House.”
2. A memorandum of telephone conversation between Ambassador Douglas in London and Assistant Secretary Thorp, not printed, amplifies the British reasoning. Ambassador Douglas noted, however, that “the British were prepared to assure him that if the bilateral has been approved, they would agree to negotiate promptly, bringing the Dominions into the picture, seeking to find some solution to the problem of Japanese trade.” (840.50 Recovery/6–2548)

   The Department in telegram 2426 to the United Kingdom, not printed, June 26, 1948, adopted Douglas’ recommendation, adding: “This is based on understanding you have firm commitment that as soon as possible but quite outside recovery program context discussions concerning Japanese trade will be undertaken.” (840.50 Recovery/6–2648)

3. The file copy bears the notation: “Approved Harry S. Truman”. In a letter to Secretary of the Army Royall, not printed, Assistant Secretary Thorp discussed his meeting with President Truman and noted that “I outlined the problem in detail, and presented your position both in terms of substance and of your strong feelings in the matter. However, the President reached the conclusion that the ERP time schedule must be met, and we could not take the final step of threatening to withhold assistance unless they conceded the issue. He therefore approved.” In his letter, Assistant Secretary Thorp also noted: “With respect to the last point in the memorandum, Amb. Douglas has assured me that he has a firm commitment from Messrs. Bevin and Cripps that the British Government will undertake to negotiate with us as soon as possible, outside the context of the ERP, the problem of Japanese trade. I wish to reiterate that both here and in London we have made our best efforts to obtain agreement on this matter. (840.50 Recovery/6–2648)