The Chairman of the United States Delegation (Willoughby) to the Secretary of State
110. Our A-12 May 131 outlines developments past week in consultations new South Africa import restrictions. Suggest follow-up in Department to ensure immediate distribution upon receipt. Following are main points of airgram:
- Prior consultation, this case was practically useless owing inability South African delegate submit details new restrictions which will be published May 15. Consultation will continue as post-consultation: South Africa hopes this not last over one week.
- In absence details, not possible ascertain extent discrimination. We had assumed effect requirement use gold or hard currency all purchases [Page 676]category A essentials whether purchased hard currency countries or not would result sharp discrimination and initial elimination purchases in US category B semi-essentials. Heard secondhand Norval2 told UK and Western Europe countries last night new information indicates not only all gold and hard currencies but also all available soft currencies needed for category A during second half 1949.
- Strong pressure for discrimination was put on South Africa by UK and to lesser extent Western Europe countries. Gist of UK argument: Viability of UK and Western Europe dependent on receipt large share of South African gold, traditionally earned by exports to South Africa. If those exports are threatened, UK will have to cut imports from South Africa and cut capital flow to South Africa regardless consequences. South Africa also stated Western Europe countries traditionally principal markets South African exports, mainly non-essentials, and those countries would only buy from South Africa to extent they are enabled buy South African imports from them.
- US and Canada took strong position against discrimination in somewhat stormy bilateral discussions with South Africa. Issues clearly drawn in working party, inadequate time for prior consultation necessitating presentation by South Africa to working party, discussion by working party, drafting report and approval report in one day, made it impossible make all issues clear in very sketchy report presented to contracting parties next day. In contracting parties the issues were not drawn, both UK and South Africa avoiding any discussion of discrimination. Time factor also precluded effort to put pressure on UK through Embassy London. US stated saw no justification discrimination on basis inadequate information available, and reserved all rights when details known. Must now decide course to be followed in post-consultations. Tentatively planning urge in working party South Africa refrain any discrimination next six months during which neither soft nor hard currency available except for category A and reconsider at end that time. In event failure, which is probable, will circulate written statement US views. Suggestions welcome.
Assuming increased discrimination involved in new restrictions obviously great importance that information to be supplied CP’s by IMF should be complete as soon as possible on factors for or against discrimination, that our position should be consistent with any discussions this issue by US representatives IMF. Suggest close liaison with US IMF representatives on matter, and Department requested keep USDel informed on relevant developments, discussions and decisions IMF.
As Department will realize UK position this problem has much broader implications than this case, raising fundamental questions (1) bilateralism versus multilateralism, and (2) relationship of non-discriminatory trade practices to viability planning ERP countries. UK, in disregard objectives GATT and other commitments, using its bargaining power to force South Africa discriminate though not justified [Page 677]by exchange situation. Net effect will be cause South Africa pay more than necessary its imports and reduce total world trade. Very unlikely influence UK Annecy to stop pressuring South Africa as former knows has backing Western Europe countries which get at least short run benefit as well as most of Commonwealth. If London Embassy believes representations would be effective urge this be done immediately.
Note time schedule contemplates completion consultation this week. Therefore important that any instructions or information pertinent to South Africa restrictions be received soonest.
Sent Department 111, repeated London (for Bliss) 3, Capetown 2.