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

840.50 Recovery/10–148

Memorandum by Mr. Richard M. Bissell, Jr., Director of Program. Operations, and Supply of the Economic Cooperation Administration¹

secret

[Washington,] September 22, 1948.

I believe it is useful to distinguish two major issues concerning the role of the United Kingdom in the European Recovery Program. The first of these, which is dealt with in the attached memorandum by Tufts², has to do with the status of the United Kingdom in relation to the United States on the one hand and to the other participating countries on the other. I subscribe to Mr. Tufts’ views on this issue. I believe we have been guilty, at times, of a major inconsistency in our attitude toward the UK. We have suspected them of wishing to circumvent the OEEC and of wishing to establish for themselves a special privileged status as senior partners in the enterprise and have been on guard against any attempt on their part to do these things. Consequently, we have not consulted with them and taken them into our confidence as fully as they might have desired. Yet, at the same time, we have complained of a lack of cooperativeness on their part and of their unwillingness to assume effective leadership. I believe it is essential that we decide exactly what we think the status of the UK should be.

The other major issue concerns the substance of British economic and political policy toward the other participating countries. The British have to make, at one time or another, concrete decisions as to the volume of exports to the participating countries, and, in general, the direction of British exports, the conditions on which Britain will enter into currency clearing arrangements with the other continental countries, the volume of credits or grants that the UK is prepared to make out of its own resources to the other participating countries, the direction of investment in the UK insofar as it affects the UK’s long-run dependence on participating countries as sources of supplies and as markets and, most important of all, the political commitments that Britain is willing to undertake to the other participating countries. The outcome of these decisions will largely determine whether the UK is to place its main reliance on strong political and economic ties with the Dominions, the U.S., the independent sterling area countries, and other overseas nations with complementary economies (such as the Latin American countries), or upon close ties with the Western continental powers.

I believe that the two sets of arrangements are in some degree alternatives, i.e., that they are in some degree competitive with one another. Regardless of our views, however, I am sure the British regard them as highly competitive, i.e., that they believe a decisive continental orientation precludes the maintenance of close political and economic ties with overseas areas and vice versa. The issue is, therefore, a very real one.

I believe we should decide what policy we would like to see the British follow in this matter, just as we should decide what status we would like to have them occupy as partners in the OEEC. I also believe we should not conclude we would like to see the British abandon an overseas orientation in favor of a European orientation. Such a shift in British policy, if it could be brought about, would, in my opinion, involve a change in power relationships in the world that would be to the marked disadvantage of the U.S. Moreover, I think an attempt to try to bring about such a shift would be quite hopeless. I suspect our conclusion on this point will be (a) that the two orientations are far less competitive with one another than the British now believe and (b) that, insofar as they are competitive, we should not wish to ask the British to prejudice their overseas political and economic connections in favor of close integration with the Continent.

As to the first of these conclusions, I would argue that none of the specific things we would like to see the British do now in connection with the ERP conflict at all seriously with their overseas economic and political relationships. As to the second, the only conflict between the two orientations that might ultimately develop would be in the political realm rather than the economic. It might arise out of the choice between political integration into a U.S. of Western Europe and political integration into an “Atlantic Community” which could include North America and, perhaps, the southern Dominions. Since I do not believe a United States of Western Europe could be achieved, or could be a going concern after it had been achieved, unless it included at least the whole of the British Commonwealth, I do not see how we can argue that British policy should be directed toward that ultimate outcome. On the other hand I believe that an “Atlantic Community” excluding the continental countries might be feasible. What stands a better chance than either is an “Atlantic Community” which would include the West European powers. These beliefs lead me to the above stated conclusion as to what is a desirable British policy.

This concept of an “Atlantic Community,” including the Western European powers, would call for strong political leadership by the United Kingdom both in Western Europe and in the British Commonwealth and other overseas areas. Such political commitments would necessarily involve the assumption of substantial military obligations by the United Kingdom. It is altogether probable that the United Kingdom could not by itself both bear the cost of these military obligations and also sustain the productive effort necessary for the success of the European Recovery Program. Therefore, the United States in urging the British to adopt the policy described above would have to be prepared to support directly the military obligations assumed by the British.

Whatever the validity of these rather random personal views, they may serve to illustrate the type of question that must be explored in the course of deciding what we would like the British to do. The main point of this memorandum is not to defend a particular conclusion but rather to urge that we do set about making this decision. Only if we know what we would like the British to do substantively and what status we think they ought to occupy can we hope to persuade them to do what we wish.

The urgency of trying to reach a decision is evidenced by the number of specific points on which we are experiencing friction in our relation with the British or are in specific disagreement with them. The following are the ones that occur to me.

1. Strategic materials. The UK has absolutely refused to agree to the inclusion of the strategic materials clause in our loan agreement with them. There is evidence that they will not be willing to take vigorous steps to increase the production of West African manganese and that we may run into difficulty with Rhodesian chrome. It is probable that they would not be happy to see an extensive investment of U. S. private capital in the Colonies and dependencies.

2. The European Trade and Payments Plan. The British appear to have maneuvered themselves into a position in which thoroughgoing automatic clearing of payments would constitute a real threat to British financial reserves. Accordingly, they wish to maintain certain exchange controls in full effect even though such action will seriously limit the effectiveness of the clearing arrangements.

3. The Sterling Area. There is no issue on which the British have been more persistent in defending their position. We have now made it pretty clear to them that we would allow them to include the non-participating sterling area deficit in their general balance of payments deficit, provided the Eastern Hemisphere Dominions gave substantial additional aid to the UK. Yet, the British are reluctant to have us negotiate directly on this point with the Dominions and will certainly not do so very effectively themselves. They have to date provided us with no justification of their sterling area deficit calculations in spite of numerous requests from us.

4. Representation at the OEEC. In spite of personal appeals by Mr. Hoffman, Mr. Harriman and Mr. Douglas, the British representation in Paris is far below the rank and stature we believe to be necessary if the UK is to exercise effective leadership in the OEEC. Moreover, the British have consistently opposed a really strong OEEC Secretariat which would, in some measure, be a substitute for vigorous direct leadership by the British.

5. The ECE versus the OEEC. Although the disagreements on this question are of lesser importance and may be the result largely of misunderstandings and personal frictions, there was apparently a strong feeling in Geneva, at least, that we are badly out of step with the British in the ECE. The worst example is the recent squabble over scrap allocations. Simultaneously with Porter’s cable describing the way the British had double-crossed him, the British in Washington received a description of the way Porter had double-crossed their delegation. I suspect this jurisdictional dispute may extend into the whole question of Britain’s East–West trade.³

I doubt if Ave are going to achieve a very satisfactory solution of any of these separate issues until we have developed, and can give expression to a thoroughly consistent attitude toward British policy and Britain’s status. Discussion of this matter with the State Department is urgently called for in view of Cripps⁴ impending arrival.

1. Addressed to Economic Cooperation Administrator Paul G. Hoffman and to Deputy Administrator Howard Bruce.
2. The reference is apparently to a memorandum of August 20 in which Robert W. Tufts of the Economic Cooperation Administration suggested that the United States adopt toward the United Kingdom a policy based on the recognition of common problems, interests, and aspirations, on the fundamental importance to the United States of a stable and prosperous United Kingdom, and on the need for the United Kingdom to take the lead in cooperative European action to solve common problems. The full text of the Tufts’ memorandum has not been found.
3. Paul R. Porter, Deputy U.S. Representative to the Economic Commission for Europe, had reported on differences with British representatives regarding allocation of scrap steel outside the ECE area. (501.BD Europe/9–1848, not printed) For documentation on the German scrap question, see vol. ii, pp. 542 ff.
4. Sir Stafford Cripps, Chancellor of the Exchequer, held discussions with Canadian officials in Ottawa, September 21–24, and arrived in Washington on September 26 to attend meetings of the IBRD and IMF and to meet with American officials.